Evercore ISI increased its price target on Carvana Co. (NYSE:CVNA) to $157.00 from the previous $142.00 while keeping an In Line rating on the stock. The firm initiated a Positive Tactical Trading call, expressing optimism for Carvana's share performance leading up to its third-quarter earnings release. The new price target reflects the potential for shares to trade between $155 and $160.
The positive outlook is based on several upcoming catalysts including the Evercore ISI State of the Used Car Industry event with Cox Auto on September 16, CarMax Inc .'s (NYSE:NYSE:KMX) results on September 26, which could signal a positive consumer environment, CarMax's Investor Day on October 15, and Carvana's third-quarter earnings announcement expected in late October or early November.
Evercore ISI highlighted Carvana's favorable consumer insights, margin improvement opportunities, and a constructive medium to long-term view for market share and margin growth.
The firm's analysis suggests that Carvana's tightened lending practices from the previous year should protect it from credit quality issues that have affected others in the industry, as noted by concerns raised by Ally Financial (NYSE:ALLY).
The analyst pointed out that Carvana is outperforming its peers in web traffic, a sign of robust consumer engagement. The projected trading range is based on an enterprise value to sales (EV/S) multiple of approximately 2.5 times, which is higher than the multiples for other multi-channel retail leaders.
Despite the overall positive sentiment towards Carvana, there is still a notable short interest in the stock, indicating that some skepticism persists among investors. The current short interest stands at 13%, with three days required to cover these positions.
Carvana has been the focus of several financial services firms following its impressive second-quarter results. Stephens initiated coverage on Carvana with an Overweight rating, projecting the company to reach EBITDA profitability by year-end.
Jefferies, TD Cowen, DA Davidson, and Piper Sandler also raised their price targets for Carvana, acknowledging the company's strategic capacity expansion and significant operational improvements.
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.
Analysts have expressed confidence in Carvana's growth trajectory and market potential, citing its innovative approach to the used vehicle retail market and its superior financial metrics compared to competitors.
InvestingPro Insights
As Carvana Co. (NYSE:CVNA) garners an upbeat assessment from Evercore ISI, real-time data and InvestingPro Tips offer additional context for investors. Analysts have revised their earnings upwards for the upcoming period, signaling confidence in Carvana's financial prospects. Moreover, Carvana's stock is trading at a low P/E ratio relative to its near-term earnings growth, which could suggest an attractive valuation for investors considering the company's growth trajectory.
On the financial metrics front, Carvana boasts a market cap of approximately $17.57 billion, with a notable P/E ratio of 22.7. The company's revenue stands at $11.67 billion over the last twelve months as of Q2 2024, with a gross profit of $2.19 billion, indicating a healthy gross profit margin of 18.77%. Additionally, Carvana has demonstrated a significant price uptick with a 1-year total return of 171.84%, reflecting strong market performance.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available, providing deeper insights into Carvana's performance and valuation metrics. Interested readers can find further details on InvestingPro's dedicated platform.
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