What happened
Shares of the online car-buying company Carvana (CVNA -0.36%) were crashing today after a Wells Fargo analyst cut the company's price target, just one day after a Wedbush analyst downgraded the stock and cut his price target for its shares.
Making matters worse for the company is the fact that Carvana has been facing legal issues in some states in response to how it handled the transfer of car ownership to some of its customers.
As a result, the automotive stock was down 18% today as of 2:45 p.m. ET.
So what
Yesterday, Wedbush analyst Seth Basham cut his price target for Carvana's stock to $15, down from $50, and downgraded the stock to neutral from outperform.
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Basham said in an investor note that the market conditions have deteriorated, the company is burning through its cash, and its current cost structure will make it difficult to reach profitability, according to The Fly.
Then today, Wells Fargo analyst Zachary Fadem lowered his price target for Carvana's stock to $30, from $35, and maintained his hold rating on the stock.
Fadem said that the company "likely represents the most levered play on an eventual recovery, but today, we simply see too many [near-term] hurdles to call a bottom."
The analyst also believes that the number of vehicle units sold in Carvana's third quarter (which will be reported on Nov. 3) will fall below analysts' expectations.
Now what
Some analysts may be more cautious about Carvana's stock right as the company continues to battle legal and regulatory issues in some states.
Some of the issues stem from Carvana allegedly failing to properly register some vehicles it had sold, resulting in some customers not being able to legally drive the vehicles they purchased, according to reporting by Barron's.
When you add the company's legal problems with recent comments from analysts, it's not surprising to see the company's share price crash today.
