Shares of online automotive retailer Carvana Co. (CVNA) have nosedived 84.7% so far in 2022. In a major development, the company is letting go 2,500 employees, which makes up 12% of its headcount. The company has made the move to streamline its staffing and expenses in line with its top line.
Additionally, Carvana’s executive brass is foregoing salaries for the remainder of the year to fund workers’ severance pay. The let-off workforce comes from the company’s operational groups as it transitions operations away from its Euclid center and some logistics hubs.
Carvana is undertaking the layoffs to return to a trajectory of efficient growth.
Acquisition of Auction Business from ADESA U.S.
Carvana also announced the acquisition of ADESA’s U.S. physical auction business from KAR Global. This acquisition of 56 locations totaling about 6.5 million square feet is for a consideration of $2.2 billion. ADESA offers the largest selection of low-mileage, one-owner cars.
Carvana Founder and CEO, Ernie Garcia, said, “This alignment with ADESA U.S. will further strengthen our foundation for growth and provide us with significant flexibility to execute our plan through a wide range of macroeconomic scenarios.”
With this acquisition, Carvana aims to offer better experience to ADESA U.S. physical auction consumers while also focusing on efficiencies and unit economic improvements.
Analyst’s Take
J.P. Morgan analyst Rajat Gupta has reiterated a Hold rating on the stock while decreasing the price target to $70 from $85. Overall, the Street has a Moderate Buy consensus rating on Carvana based on eight Buys and 12 Holds.
The average Carvana price target of $125.37 implies a potential upside of 241.8%.
Investors Remain Positive
TipRanks data indicates investor sentiment remains very positive about Carvana. The number of portfolios holding Carvana has increased by 4.9% in the past 30 days alone.
Closing Note
Carvana has undertaken these major initiatives to return to the path of rapid, profitable growth. How these moves pan out in the future remains to be seen. Meanwhile, TipRanks website traffic data indicates the number of online visitors to Carvana has ticked upwards from 25.28 million in January to 33.36 million in March.
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