What happened
Shares of Carvana (CVNA 2.85%), an online used car retailer, were falling today after an analyst at RBC Capital downgraded the company's stock and cut his price target.
The automotive stock fell by as much as 10.9% today and was down by 9.2% as of 2:21 p.m. ET.
So what
RBC Capital analyst Brad Erickson said in a research note today that he's downgrading Carvana's stock from outperform to sector perform and lowered his price target for the stock from $155 down to $138.
Image source: Getty Images.
The analyst said that investors may already be accounting for the company's long-term growth and that any misstep in Carvana's implementation of its recent acquisition of Adesa's physical vehicle auction services in the U.S. (acquired from KAR Auction Services) could hurt the stock.
"We think investors are now discounting in significant long-term growth leaving less room for upside in the stock and potentially tilting risk/reward less favorably in the event of execution missteps, particularly related to the Adesa acquisition," Erickson said in the note, according to Barron's.
Carvana announced the $2.2 billion acquisition at the end of February and said that the deal would "enhance Carvana's customer offering with a broader selection of vehicles and even faster delivery times."
NYSE: CVNA
Key Data Points
Now what
Erickson's downgrade and price target reduction for Carvana's stock comes on the heels of two analysts lowering their price targets for Carvana just last week.
Needham analyst Chris Pierce lowered his target from $222 to $173, but kept a buy rating on the stock last Friday. And Piper Sandler analyst Alexander Potter lowered Carvana's price target to $130 from $317 last Wednesday, while maintaining his neutral rating on the stock.
With today's share price drop, Carvana's stock is down 59% over the past six months. All of which means that investors are no doubt going to keep a very close eye on the company's first-quarter financial results that will likely be reported in May.
