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At the beginning of the year, I added Carvana to my watchlist to remind myself to study the stock. Since then, the stock has gone up around 1,000%! Obviously, I wish I would have bought this stock before that happened. With this huge jump in share price, I want to look at the company's financials now and see if the stock is now overvalued and why this jump in share price occurred to begin with.
First, Carvana now trades at a market cap of $8.86 billion. They are not profitable. In 2022, Carvana brought in $13.6 billion but lost $1.59 billion. In 2021, They brought in $12.81 billion but lost $135 million. In 2020, they brought in $5.59 billion but lost $171 million. I don't expect Carvana to be profitable as they are supposed to be a growth stock, but I do find it interesting that no matter how much they increase their revenue, they don't seem to be any closer to being profitable.
While researching this company, I read a ton of articles that stated that Carvana's new valuation was absolutely ridiculous. I agree that I think Carvana is trading too high, but I don't think their valuation is as crazy as people are saying. The company trades less than last year's revenue which for a high growth company doesn't automatically mean that it's not trading too high but it's not that insane either. That being said, I definitely would not buy this stock right now.
Now, why is this stock trading so high. Well, there are two main reaons. One, Carvana recently had a really good earnings call. While they are still losing money, they are losing less than analysts thought that they would be. Carvana also struck a debt restructuring bill that reduced their debt by $1.2 billion. These two things caused a surge in share price.
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