Carvana Co (NYSE: CVNA) is down more than 80% for the year but a Piper Sandler analyst says picking it here could result in massive profits over the next twelve months.
Carvana stock has a 100% upside
On Monday, Alexander Potter recommended that you invest in the Carvana stocks as it could climb to $73 a share. The price objective translates to a 100% upside from its previous close. The analyst wrote:
Carvana is now 1/10th as valuable as it was twelve months ago, and after running a detailed sensitivity analysis, we think many realistic scenarios suggest that the stock is grossly undervalued.
Interestingly, the bullish call arrives at a time when the Tempe-headquartered firm is fighting a real risk of bankruptcy. Rising rates and falling used car prices are not making it any easier for Carvana either.
Earlier this year, Carvana completed the $2.20 billion acquisition of ADESA U.S.’s physical auction business.
Upside outweighs the risk
Potter acknowledged these challenges in his note but said the potential for significant upside was far bigger than the risk.
Despite a weighted average cost of capital (WACC) of nearly 17%, we think investors should consider owning at some Carvana stock.
Last month, the NYSE-listed firm reported its financial results for the second quarter that came in well below the Street estimates.
About a couple months ago, insiders were reported to have been aggressively buying “CVNA”, suggesting they had immense confidence in the future of this company.
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