Any time an industry is in turmoil, a company within it can see notable volatility in its stock price, with some movements making less sense than others. On Wednesday, one of the more up-and-down titles in the sector, Carvana (CVNA 2.96%), saw a counterintuitive rise. The company’s share price ended the day 3% higher, despite yet another negative analyst note on its prospects.
That morning, Wedbush’s Seth Basham reiterated his underperform (i.e., sell) recommendation on Carvana stock with a target price of $1 per share. For reference, that’s quite a steep way down from the company’s current level of $3.83.
On the back of recently sluggish sales, macroeconomic worries that affect consumer behavior, and the shenanigans around Tesla owner Elon Musk’s Twitter misadventure, the automotive industry has been a glaring red light for investors. Dealership operators like Carvana have been some of the worst performers: The company’s stock has lost a queasy 98% of its value year to date.
In his latest note on Carvana, Basham wrote that its business can only get worse. He lowered his estimates on the company’s crucial units-sold measure. He’s now expecting the company to sell 85,000 vehicles in the fourth quarter. That’s well down from the analyst’s previous estimation of 94,000, not to mention the consensus projection of 96,000.
Yet especially in bearish environments, the market has plenty of bargain hunters. Carvana remains a force in the vehicle-retail scene, and value-minded investors might be starting to think either that it’s been unfairly punished or the auto-maker’s future isn’t as dark as some believe. Time will tell, but that 98% slide in share price is certainly tempting for investors looking for deals.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.