On Friday, Stephens reaffirmed its positive stance on Carvana Co. (NYSE:CVNA), maintaining an Overweight rating with a $190.00 price target. The firm's perspective is based on the anticipation of Carvana's third-quarter 2024 results, which are set to be released after the market closes on Wednesday, October 30. Stephens initiated coverage on the company with the same rating and price target on September 11, 2024.
The analyst highlighted Carvana's current trading level, which is around the $190 target, noting a significant increase from the $140 mark observed in mid-September. The firm hosted a meeting with Carvana's management and a site tour at the company's Colonial Heights, VA Inspection and Reconditioning Center (IRC) on September 26, 2024. This event provided investors with a closer look at Carvana's operations and business model.
Stephens expressed the view that Carvana is one of the more impressive consumer business models to emerge in recent times, which has not been fully recognized by investors. The firm anticipates that the upcoming third-quarter results will further highlight Carvana's robust and profitable business model, as well as its operational momentum, despite the challenges of a flat to declining and below-average unit profitability in the used car market.
The analyst's comments suggest a confidence in Carvana's ability to perform well in the current market environment. Stephens expects the third-quarter results to provide evidence of Carvana's strength in its sector. Carvana's stock is currently trading at a level that reflects the analyst's price target, indicating the market's alignment with Stephens' valuation.
In other recent news, Carvana has been making significant strides in its operations and financial performance. The online auto retailer has reached a milestone of four million online vehicle transactions since its inception. A notable highlight is the company's third-quarter unit sales projections, which have been raised to 107.8 thousand units, marking a 33% increase year-over-year, according to Citi's research.
Analysts have also updated their outlooks on Carvana. BofA Securities raised the price target to $210 from the previous $185 while maintaining a Buy rating, reflecting confidence in Carvana's strategy and market position. Stephens reaffirmed its Overweight rating on Carvana, drawing parallels between Carvana's strategy and the successful tactics employed by McDonald's (NYSE:MCD) in the past. However, Citi maintains a neutral stance on Carvana despite the positive adjustments.
Carvana's management projects a year-over-year growth rate of over 25% for third-quarter unit sales and EBITDA for 2024 between $1 billion and $1.2 billion, surpassing the consensus estimate of $890 million.
InvestingPro Insights
Carvana's recent performance aligns with Stephens' bullish outlook, as evidenced by InvestingPro data. The company's stock has shown remarkable strength, with a 405.86% price total return over the past year and a 261.86% return year-to-date. This impressive rally has brought Carvana's stock to 99.01% of its 52-week high, corroborating Stephens' observation of the stock trading near their $190 target.
InvestingPro Tips highlight that Carvana is trading at a low P/E ratio relative to near-term earnings growth, suggesting potential undervaluation despite the recent price surge. This aligns with Stephens' view that the market may not fully recognize Carvana's business model strength. Additionally, the company's liquid assets exceeding short-term obligations indicate financial stability, which could support continued operational momentum.
Investors should note that InvestingPro offers 19 additional tips for Carvana, providing a more comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable as the market anticipates Carvana's upcoming Q3 results.
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