Put Buyers Circle Carvana Stock on Heels of Record High

Is CVNA worth the risk after massive bull run over the past year?

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Carvana Co. (NYSE:CVNA) is an e-commerce company that sells used cars through its online store. CVNA’s platform allows consumers to browse more than 45,000 vehicles, finance, trade-in or sell their current vehicle to Carvana, sign contracts, and schedule delivery or pickup at one of Carvana’s patented and automated Car Vending Machines. This afternoon, CVNA was last seen trading down 0.9% at $354.36.

Carvana stock has increased in price by approximately 76% year-over-year and is up 126% since bottoming at $158.25 in September last year. Additionally, shares of CVNA have grown 47% year-to-date and Carvana stock is currently down just 5% since reaching up for a fresh all-time high of $376.83 earlier this month on August 10.

On the earnings front, Carvana has beat Wall Street's expectations on three of its last four quarterly earnings reports. For Q3 2020 the company beat analysts’ estimates by a margin of $0.21, reporting an eps of -$0.62 In Q4 2020 their eps increased to -$0.10, beating expectations by a margin of $0.22. The following quarter they had a decrease in earnings, dropping to -$0.87 per share. The company also missed estimates by a margin of $0.40. In their most recent quarter Carvana reported an eps of -$0.46 and beat expectations by a margin of $0.21. Analysts have the company’s eps coming in at -$0.39 for their next earnings report.

Carvana has maintained an incredible revenue growth rate in recent years. Carvana stock also has a price-sales ratio of 2.96, but CVNA has yet to reach profitability so there is no forward price-earnings estimates available for CVNA. Overall, it is difficult avoid labeling Carvana stock as overvalued, given CVNA’s massive surge in price over the past two years. However, Carvana has managed to maintain an equally impressive rate of growth in sales, making CVNA an intriguing speculative play over the next three to five years.

Longer term, a shift in the options pits could keep the wind at the equity's back. This is per CVNA's 10-day put/call volume ratio of 1.21 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 74% of readings in its annual range. This means puts are being picked up at a quicker-than-usual rate.

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