On Thursday, Stephens, a financial services firm, initiated coverage on Carvana Co. (NYSE:CVNA), an e-commerce platform for buying and selling used cars. The firm assigned an Overweight rating to the stock, with a price target set at $190.00.
The new coverage comes as Carvana is recognized for its innovative approach to the used vehicle retail market, which is considered the largest consumer vertical in the United States.
Carvana has been commended for integrating a digital showroom with a centralized backend system, which has allowed the company to achieve economies of scale and superior financial metrics compared to its competitors.
According to Stephens, Carvana's business model has resulted in a more convenient, lower-cost experience for consumers, positioning it as the most profitable used vehicle retailer on a per-unit basis. The firm also projects that Carvana will reach profitability on an EBITDA basis by the end of the year, despite holding only a 1% market share.
Over the past twelve months, Carvana has shown significant operational and financial improvements. Stephens' analysis suggests that Carvana is poised to dominate the U.S. retail market for used vehicles, drawing parallels to the success of other category leaders such as Home Depot (NYSE:HD), Ulta, and Chipotle (NYSE:CMG).
The Overweight rating indicates that Stephens expects Carvana's stock to perform better than the average return of the stocks analyzed by the firm within the same sector. The $190 price target reflects the firm's confidence in Carvana's growth trajectory and market potential.
In other recent news, Carvana Co. has been the center of attention following its second-quarter results and subsequent analyst reports. Investment firm Jefferies has raised its price target for Carvana to $150, citing the company's strategic capacity expansion. The firm's revised model shows a 7% increase in their 2025 revenue estimate for Carvana, and a significant 39% increase in their EBITDA estimate.
Similarly, TD Cowen raised its price target for Carvana to $148.00, following a substantial 32.5% year-over-year increase in retail unit sales for the second quarter. DA Davidson increased its price target for Carvana to $155, acknowledging the company's strategic responses to previous challenges. Piper Sandler also adjusted its price target for Carvana to $151, recognizing the company's sustainable profitability improvements.
These developments come after Carvana's record second quarter in 2024, which saw the company continue its growth trajectory. The company's management provided guidance for third-quarter unit sales to exceed the second quarter's performance, indicating a year-over-year growth rate of over 25%.
Carvana's projections for 2024 EBITDA range between $1 billion and $1.2 billion, surpassing the consensus estimate of $890 million. These recent advancements underscore Carvana's resilience and adaptability in the dynamic market.
InvestingPro Insights
As Carvana (NYSE:CVNA) continues to innovate within the used vehicle retail market, the latest data from InvestingPro provides a deeper understanding of the company's financial position. With a market capitalization of $28.2 billion, Carvana is trading at a P/E ratio of 21.33, indicating investor confidence in future earnings. Despite a slight revenue decline of 1.09% over the last twelve months as of Q2 2024, the company has experienced a substantial quarterly revenue growth of 14.89%. Additionally, Carvana's EBITDA growth of 278.35% during the same period underscores the company's increasing operational efficiency.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, reflecting optimism about Carvana’s performance. This is complemented by the company's strong return over the last three months, with a 20.23% price total return, showcasing the stock's recent momentum. For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available, which delve into various aspects of Carvana's financial health and market performance.
The insights derived from InvestingPro suggest that Carvana's innovative business model and improving financial metrics may well support Stephens' positive outlook and the Overweight rating assigned to the stock. With Carvana's next earnings date on the horizon, investors will be keenly watching to see if the company can maintain its trajectory and achieve the profitability that analysts predict.
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