Carvana Stock Slips on Mixed Analyst Reactions

The equity sports affordably priced premiums right now

Digital Content Manager
Jun 23, 2021 at 10:18 AM
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The shares of Carvana Co (NYSE:CVNA) are down 1.6% at $308.42 this morning, after J. P. Morgan Securities downgraded the stock to "neutral" from "overweight." The analyst in coverage noted a less favorable risk-reward in the near term, and that it is time for the equity to cool down after outperforming its peers. However, the firm still believes there are long-term growth opportunities for Carvana, and that it has gotten credit for its strong multi-year revenue and gross profit growth. Jefferies seemed to agree with a more favorable long-term outlook, hiking the security's price target to $400 from $375. 

Carvana stock just yesterday attempted to rally back toward its March 2, all-time high of $323.39. While the security ultimately fell short of those levels, it still notched its fifth-straight win, as well as its second highest close on record. The equity has the support of its 20-day moving average, too, and is up an impressive 140.6% year-over-year.

Analysts were overwhelmingly optimistic towards the stock coming into today, with 17 of the 22 in question sporting a "buy" or better rating, while the remaining five said "hold." Plus, the security looks like it could benefit from a short squeeze, as the 17.28 million shares sold short account for a whopping 22.1% of the stock's available float, or over two weeks' worth of pent-up buying power.

The options pits echo analysts' optimism, with a strong appetite for calls. This is per CVNA'S 50-day call/put volume ratio of 1.23 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands in the 88th percentile of its annual range. This indicates long calls are being picked up at a faster-than-usual rate.  

CVNA options are a bargain at the moment. The security's Schaeffer's Volatility Index (SVI) of 47% sits in the extremely low 5th percentile of readings from the past 12 months. In other words, options players are pricing in low volatility expectations right now.

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