© Reuters. Carvana (CVNA) Stock Rises Despite Brief Kerrisdale Capital Report
Shares of Carvana (CVNA) rose about 2% on Monday despite Kerrisdale Capital publishing a note saying it is short the stock.
The short-selling firm called Carvana a “poorly capitalized and struggling auto retailer.”
Carvana shares rose 32% last week and are now valued at around $19 billion.
“Before this move, Carvana's valuation was already at the limit; now, its stock price is so ridiculous that not only is it trading at levels unheard of for a car dealership, but it's trading at a premium to major tech companies “Argues Kerrisdale.
“Carvana does not have a brighter path to profitable growth than CarMax (NYSE:), much less Microsoft,” they add. “As its tech peers drive an exciting revolution in ai, Carvana shareholders risk being run over to help pay off billions in high-yield debt at 14% PIK interest.”
Kerrisdale says that at current levels, Carvana's enterprise value is 40% higher than CarMax's “despite selling half the number of retail units and having no demonstrable advantage in terms of margins, market share or allocation.” of capital”.
They believe Carvana stock should, at a minimum, converge to trade at multiples in line with CarMax. The company assigned a price target of $16 to the stock.
