Carvana (CVNA) stock price forecast 2024: buy, sell, hold?

Carvana (NYSE: CVNA) stock price has retreated in the past few days as investors start to take profits after a remarkable year. The shares dropped to a low of $54.10 on Tuesday, a few points below the year-to-date high of $62. Still, Carvana is one of the best-performing companies in Wall Street as the stock surged by over 1,065% in 2023.

Why CVNA stock surged in 2023

Carvana shares did well in 2023 even as it became one of the most shorted companies in Wall Street with a short interest of 38%. The company’s performance was a surprise considering that some analysts expected it to go bankrupt because of its huge debt burden and falling sales.

Carvana worked hard to solve its debt situation. Most recently, the company completed its debt exchange program in a bid to prevent a short-term maturity. It exchanged $5.52 billion of its unsecured notes for cash and new secured notes. As a result, that transaction reduced its outstanding debt by over $1.32 billion. 

It also extended its maturities and reduced the cash it needs to pay interest by over $455 million per year. It moved maturities from 2025 to 2028, which will give it more flexibility on how it uses its cash. 

Carvana could also benefit if the Federal Reserve goes ahead and starts cutting interest rates as most investors expect. Such a move will help it reduce its variable debt payments and possibly boost demand for vehicles. 

The most recent results showed that high rates and inflation has had a major impact on the used vehicle market. Its retail units sold dropped by 21% to over 80,987 while its revenue slipped by 21% to over $2.77 billion. On the positive side, the company improved its cash flow by over $1.6 billion as it sold financing receivables. 

Some analysts believe that Carvana stock has more upside. In a recent note, JP Morgan’s Rajat Gupta said that the company had a head start in the online vehicle retailing. He also noted that CVNA was right to focus on profitability by limiting growth.

Carvana stock price forecast

CVNA chart by TradingView

The daily chart shows that the CVNA share price has been in a strong uptrend in the past few months. Recently, however, the shares have pulled back and are trading at $53.73. This pullback is understandable since the stock recently retested the key resistance point at $57.94, its highest swing in August last year and July 2023.

Carvana price is above the 50-day and 200-day Exponential Moving Averages (EMA), which is a positive thing. Therefore, I suspect that the stock will resume the bullish trend in the coming months. This view will be confirmed if it moves above the YTD high of $62.50. Such a move will see the stock soaring to $80 in 2024.