Carvana stock drops, as a more than doubling in three weeks prompts J.P. Morgan to turn bearish

Shares of Carvana Co. /zigman2/quotes/206651606/composite CVNA +12.16% dropped 2.9% in midday trading Monday, after J.P. Morgan analyst Rajat Gupta turned bearish, saying the online car buying and selling platform's stock is "expensive" in the wake of its recent near-record rally the previous session. Gupta cut the rating to underweight after being at neutral since June 2021. The stock price target was raised to $35 from $25, but the new target still implies about 23% downside from current levels. The stock had rocketed 40.1% on Friday to a three-month high, despite the company reporting a wider-than-expected loss and revenue that also missed, with some analysts saying efforts to improve profitability were progressing. But J.P. Morgan's Gupta said visibility remains "poor" and the trajectory of used car supply remains highly uncertain. "At current levels, there is minimal margin for error on execution and still material risk to growth, and particularly profitability if the macro worsens further given the degree of capacity/fixed costs and a captive [financial company]," Gupta wrote in a note to clients. The stock has run up 125.5% since it closed at a four-year low of $20.23 on July 14, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.30% has 7.3% over the same time. Separately, Carvana's short interest of a percent of the public float, or shares available for public trading, was 29.88%, compared with that of 8.5% for used car retailer CarMax Inc. [: kmx].