Carvana stock upgraded to Overweight by Piper Sandler, shares move higher

Yahoo Finance Live anchors discuss Piper Sandler upgrading Carvana stock to Overweight from Neutral.

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BRAD SMITH: Let's talk about Piper Sandler analyst upgrading shares of Carvana here this morning. Too overweight, suggesting that the stock is grossly undervalued here. We saw shares higher in premarket, and now they've continued to move higher. They were up 7% premarket, now they're up by about 12% here as we've begun today's trading activity.

Many realistic scenarios, they're saying-- are saying that the name is grossly undervalued. And we've also seen some declines in used car prices. Of course, we know that they were historically high coming in to this point, too.

And so perhaps in the move lower in some of those prices, that provides at least some type of entry point for potential car buyers to now kind of kick the tires on some of the vehicles that may be sitting on lots. And Carvana looking to move through that inventory as well.

JARED BLIKRE: Yeah, I think the shareholders want to kick some tires here on the stock price and see how it's gonna hold up. Here's Piper on the stock moves. Carvana is now 1/10 as valuable, that means 90% off as it was 12 months ago. And there on the screen, you can see a max chart that goes back to their IPO date. And I'll get to that in a second. But 1/10 as valuable as it was a year ago.

After running a detailed sensitivity analysis, we think any many realistic scenarios suggest that Carvana is grossly undervalued. Noting that falling prices for used cars and rising interest rates are a risk to the company, and says bankruptcy is a real possibility. That means potentially to 0.

And let me just show you this one year chart, down 87%. Let's call that 90%. Needs to rally 900% in order to get back up to unchanged. So Piper is saying, you could double in value, that means you're still down 80%.

JULIE HYMAN: I mean, this is a lukewarm upgrade to be sure, right? I mean, when they say, it could easily continue falling, but with so much potential upside, you might as well just nibble on a little piece of it.

At the same time that they're upgrading it, I think as we showed, they're lowering the price target on the company to account for that possibility. So it's not like that this is a full-throated defense of the fundamentals of this company. It's basically, it's cheap, it could go either way.

BRAD SMITH: Right.

JULIE HYMAN: You might as well take a bit of a chance here. And I should mention--

JARED BLIKRE: Vegas. Vegas style.

JULIE HYMAN: Yeah, right. Exactly. [CHUCKLES] I should mention the short interest on this stock is still 27% of float. So there are still a lot of people who are betting that the stock will continue to go down, for what it's worth.

JARED BLIKRE: Yes, for what it's worth.