Carvana stock price has moved into a bear market after plunging by over 36% from its highest level this year. CVNA has fallen to its lowest level since January 26, giving it a market cap of $46 billion. So, is Carvana a good stock to buy now?
Carvana is growing, but concerns remain
Carvana has become one of the fastest and best-performing companies in Wall Street after surging by over 180% in the last five years. It rose by over 6,300% from its lowest level in 2023, bringing its market cap to over $43 billion.
Carvana stock has jumped after the management successfully handled its debt burden, which threatened its existence a few years ago.
The company has also benefited from strong revenue growth as it continued to gain market share in the US. As a result, its revenue jumped to over $13.6 billion in 2024, up from $10.7 billion a year earlier.
It has also become a highly profitable company, with the annual figure rising to $210 million. This profitability is because of its cost reduction, with its advertising expense per unit falling by 25% to $550.
Carvana’s stock has also jumped as the management has prioritized profitability over revenue growth. This prioritization has pushed the management to ensure that all vehicles it sells are delivered profitably.
Carvana has attracted substantial criticism and praise in the past. Most critics point to its valuation and its arrangement with DriveTime, a company started by Carvana’s founder father. Hindenburg Research, a popular short seller company that shuttered its operations this year, accused the company of trade manipulation.
It also accused Carvana of having a toxic loan book, comprising of $15.4 billion in asset-backed securities (ABS) and substantial delinquencies. Carvana has rejected all these claims and maintained that its business was doing well.
CVNA growth continued soaring in Q4
The most recent results showed that Carvana continued doing well in 2024. It sold 416,348 vehicles during the year, a big increase from the 312,847 it sold a year earlier. These vehicles brought in its revenue to $13 billion.
Notably, Carvana’s annual retail units were lower than the 425,237 and 412,296 that it sold in 2021 and 2022. That is a sign that the company is benefiting from higher vehicle prices sold on its platform. Indeed, the gross profit per unity rose to $7,196, up from minus $201 a decade earlier.
The management expects that its business will continue doing well this year. While it did not give a number, Wall Street analysts anticipate that the first quarter revenue will rise by 27% to $3.9 billion. The annual revenue figure will grow by 19% to $16.34 billion, followed by $19.5 billion next year.
The biggest concern for Carvana stock price is that it is still one of the most overvalued companies on Wall Street. It has a trailing P/E ratio of 117.52 and a forward multiple of 69.
Read more: JPM raises Carvana stock target: how high could CVNA go in 2025?
Carvana stock price analysis
CVNA chart by TradingView
The daily chart shows that the CVNA share price has crashed after peaking at $292.87 earlier this year. It has now plunged by over 30% to $186, and moved below the key support level at $267, the highest swing in November last year. This price was the double-top point.
The stock has crashed below the 50-day and 100-day moving averages and is nearing the neckline at $175.50, the lowest swing on January 3. Also, the Percentage Price Oscillator (PPO) and other oscillators have all pointed downwards.
Therefore, because of the double-top pattern, there is a risk that it will have a strong bearish breakdown, with the next point to watch being at $150.
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