Carvana stock gets slight respite ahead of Q4 earnings, but uncertainty remains

Two Carvana Co. analysts last week said company investors are slightly more optimistic of the company's chances of avoiding bankruptcy than they were in December.

The online used-vehicle retailer, which is scheduled to release fourth-quarter and full-year 2022 earnings Thursday, saw its stock share price double from $5 in mid-January to $10 by month's end. That upward movement has been driven in part by investors who believe recent upticks in used-vehicle prices and demand may bode well for the company in the first quarter, according to analysts.

Wells Fargo equity analyst Zachary Fadem wrote in a Friday note to investors that while Carvana's improved share price performance "suggests investors are moving past the most draconian bear case" of bankruptcy, 2023 "still looks squishy" for the retailer. The firm on Friday raised its price target for Carvana from $5 to $10.

Fadem wrote that Carvana's fourth-quarter vehicle sales are likely to fall short of Wall Street expectations. Concerns about Carvana's liquidity and how much gross profit it brings in per vehicle sold are likely to linger, he added.

In a research note Thursday, Piper Sandler analyst Alexander Potter wrote that slashed estimates are forcing the firm's price target for Carvana to $21 — down from $45 — but the firm does not think Carvana will go bankrupt.

Carvana shares closed Friday at $11.37. That is an improvement from its all-time-low closing price of $3.72 on Dec. 27 but a plunge from its $360-plus closing share price highs recorded in mid-2021.

The retailer's stock was down about 8 percent to $10.48 in trading around 1:30 p.m. Tuesday.