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Carvana stock may be getting ahead of itself, according to Jefferies. The firm downgraded shares of the secondary vehicle market stock to underperform from hold on Sunday. Jefferies also slashed its price target to $30 from $55, implying downside of nearly 32% from Friday’s close. Carvana has been on fire this year with a nearly 830% jump. CVNA YTD mountain Carvana has surged nearly 830% in 2023. However, analyst John Colantuoni said Wall Street seems to be overestimating how long Carvana can sustain its recent higher profitability metrics, which merely reflect “transitory tailwinds that will abate in the coming quarters.” “We believe GPU [gross profit per unit] is temporarily benefiting from transitory tailwinds like wider wholesale/retail spreads and the timing of loan sales, which we expect to normalize throughout 2H23,” Colantuoni said. “We also envision an acceleration in Unit growth next year leading to inefficiencies that further negatively impact per unit economics.” And while a pending company capital restructure could help Carvana lower its interest payment obligations, Colantuoni added, the effort will only become a larger burden further down the road. “We estimate deferring payments at 13% PIK [payment-in-kind] interest would actually burden CVNA with ~$40M of additional expenses beginning in ’26 (to ~$675M),” Colantuoni said. — CNBC’s Michael Bloom contributed to this report.
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