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Carvana stock in need of cash infusion, BofA reports

According to Bank of America, the future of Carvana’s stock could go one of two ways. The online retailer is in need of more liquidity as it continues struggling to turn profits. 

Earlier this week, analyst Nat Schindler stated, “we now estimate Carvana is likely to run out of cash by the end of 2023 without a cash infusion. However, there are no signs of a potential cash inflow, and it is nearly impossible to predict whether and when that would happen”.

Carvana, carMore: Carvana hit hard by economic headwinds

Because of the increase in interest rates, Carvana’s stock has fallen dramatically this year, dropping by more than 96%. Schindler continued, “This makes the performance of this stock appear binary. Either it goes to zero or it is worth many times of its current $7.36”.

Carvana’s stock is now trading at $10 per share, down from its previous price objective of $43. Resulting in a 35% upside from the $7.34 closing price earlier this week. Nevertheless, the business is still having problems as it burns through cash with $600 million in annual interest expenses

On the other hand, a cash flow injection could indicate a gradual improvement. For instance, it is hoped that the Garcia family, who are the CEO and chairman, will provide the funding. Due to the fact that without it, Carvana’s cash would run out and its stock worth would be nothing.

“Current valuations imply a significant likelihood that the equity value falls to zero, but a turnaround could be aggressive should outside financing become available. Our bull case assumes that the company is able to raise capital, keeping it liquid long enough to cut expenses and reach profitability,” Schindler wrote.

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Jaelyn Campbell
Jaelyn Campbell
Jaelyn Campbell is a staff writer/reporter for CBT News. She is a recent honors cum laude graduate with a BFA in Mass Media from Valdosta State University. Jaelyn is an enthusiastic creator with more than four years of experience in corporate communications, editing, broadcasting, and writing. Her articles in The Spectator, her hometown newspaper, changed how people perceive virtual reality. She connects her readers to the facts while providing them a voice to understand the challenges of being an entrepreneur in the digital world.

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