The Irony Of A 'Virtual' Bus Tour With Carvana: Car Buyers Want 'Physical' Shopping Experiences Again

Carvana Co's CVNA mission to revolutionize the car-buying experience by taking it 100% online may have backfired.

What Happened: Oppenheimer on hosted a virtual bus tour focused on the digital auto space in mid-December. The firm met with senior leadership members of Carvana in an attempt to uncover why the stock is spinning its wheels.

"CVNA indicates that in the nearer-term, used car buyers have returned somewhat to retailers offering physical shopping experiences," Oppenheimer analysts wrote in a new note to clients.

That's quite the speed bump for a company that was built on the promise of being able to buy vehicles from the comfort of one's home. 

Oppenheimer also pointed out that broader consumer demand is waning and macro pressures are ongoing, "if not intensifying." Carvana is focused on aggressively lowering costs in response to these trends, the analysts said. 

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Declining used car prices are also working against the company. Carvana doesn't believe long-term profitability dynamics have changed, but profitability could be impacted in the near term as prices continue to slide. 

Why It Matters: Carvana shares were on a crash course from hell for all of 2022. The stock was down more than 97% last year. Most recently, the company has gone bumper to bumper with bankruptcy concerns. 

In mid-December, a group of Carvana's largest creditors signed a pact that binds them to act as a group in any negotiations with Carvana. The move aimed to prevent creditor fights that have complicated other debt restructurings in the past. 

Wedbush slapped a $1 price target on the stock and said the best case scenario for the company is that its equity becomes highly diluted. Yet Oppenheimer's note indicates that Carvana's leadership team "seems comfortable" with its liquidity position and appears optimistic that it can use existing assets and other means to raise capital if needed. 

A Technical Note From Benzinga: Carvana reversed into an uptrend on Dec. 7 and on Wednesday, the stock was forming an inside bar pattern, which leans bullish in this case. If Carvana pushes higher, it may find resistance at the top of a gap near the $6.50 mark.

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CVNA Price Action: Carvana shares have found new life in 2023. The stock is up nearly 50% since the start of the year.

Carvana shares closed Friday (Jan. 13) down 12.6% at $7.02 according to Benzinga Pro.

Originally published on Dec. 14, 2022

Photo: Tony Webster from Flickr.