Carvana Stock Revs Up After Analyst Upgrade

Cowen and Company issued a price-target cut to $60 from $95

Deputy Editor
Nov 1, 2022 at 10:13 AM
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Carvana Co (NYSE:CVNA) stock is up 17.5% to trade at $15.90 at last glance, after J.P. Morgan Securities upgraded the auto retailer to "neutral" from "underweight." The brokerage firm believes Carvana has a multi-year head start in the online-only space of the vehicle industry, and said risks around the used-car retailer "seem better understood," even if the company is "not out of the woods." 

Since Oct. 19, the shares have struggled to topple the $16 area, with resistance from the 10-day moving average since Sept. 16. Still, this positive price action could help Carvana stock strike a chunk out of its hefty year-over-year deficit, which is currently at 93.1%.

Circling back to analyst sentiment, Cowen and Company today slashed its price target  to $60 from $95. Of the 28 analysts in coverage, 18 carry a "hold" or worse rating, while the 12-month consensus price target of $44.63 is a massive 193.6% premium to current levels. 

Plus, shorts have been building their positions, with short interest up 19.5% in the last two reporting periods. The 34.57 million shares sold short now make up a hefty 36.2% of the stock's available float, or over three days' worth of pent-up buying power. 

According to data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Carvana stock's 50-day call/put volume ratio of 1.88 ranks higher than 97% of annual readings, indicating a healthier-than-usual appetite for long calls. 

These traders are getting premium at a steal, according to CVNA's Schaeffer's Volatility Scorecard (SVS) of 91 out of 100. This elevated reading means CVNA has exceeded option traders' volatility expectations during the past year.

Drilling down to today's options activity, 5,493 calls and 2,463 puts have crossed the tape, or around 1.8 times the volume that's typically seen at this point. The most popular contract is the weekly 11/4 13.50-strike call, where new positions are being opened.



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