Will this fallen angel recover

Carvana’s share price is hovering near its lowest level since March 2020 as investors continue to worry about demand. CVNA has crashed for the past eleven consecutive weeks and has erased around 93% of its value. Its market capitalization has collapsed to around $5 billion. At its peak, Carvana was valued at over $65 billion, which means the company’s investors wiped over $60 billion of its value.

Why did CVNA crash?

Carvana is a company changing the automotive industry. His business concept is relatively simple. He buys cars at auction, fixes them, then publishes them on his website and apps. On these platforms, customers can easily scan thousands of vehicles, search for finance, and then purchase them. Buyers can then have their cars delivered or collect them from its vending machines.

Carvana has seen strong growth as demand from automakers has surged in recent years. For example, in 2021, it had over $12 billion in revenue. This is a big increase from the $5.58 billion it generated in 2020 and the $3.9 billion it made in 2019. However, like other Nasdaq companies 100, he increased his losses. Over the past twelve months, the company has lost more than $700 million even as demand for automobiles has remained at high levels.

Carvana’s share price has crashed as investors predict the company will have a longer road to profitability than expected. Moreover, they believe that the recent acquisition of ADESSA will have a negative impact on the company. However, Bank of America analysts expect it to recover. They said:

“With the decision to acquire ADESA and the resulting increase in costly debt, investors appear to have largely abandoned this once very promising business. However, we still believe in Carvana and its desirability for one glaring reason: it is, in our opinion, a fundamentally better way for consumers to shop and buy used cars. »

Carvana Share Price Prediction

The daily chart shows that the CVNA stock price has been in a strong downtrend over the past few months. The stock fell below all the moving averages. The selling accelerated when it broke below $100 in April. A closer look shows that oscillators like the MACD and the Relative Strength Index (RSI) have formed a bullish divergence pattern.

Therefore, in my view, selling will likely continue in the coming weeks, with the next key level to watch being $15. However, a move above the resistance level at $35 will invalidate the bearish view.

Karen J. Nelson