On Thursday, Citi updated its financial model for Carvana Co. (NYSE:CVNA), leading to an increase in the company's price target from $125.00 to $195.00, while the firm kept its Neutral rating on the stock. The revision follows proprietary research indicating that Carvana's third-quarter unit sales may outperform market expectations.
According to Citi's Retail unit tracking data, Carvana's sales for the third quarter of 2024 are projected to reach approximately 107.8 thousand units. This figure represents a year-over-year increase of 33% and a 6% rise from the previous quarter, surpassing the consensus estimate of around 106 thousand units. Based on these findings, Citi has adjusted its estimates for Carvana's unit sales, gross profit per unit (GPU), and EBITDA for the third quarter and future periods.
The firm noted Carvana's growing inventory and demand for its retail units as key factors behind the improved projections. Additionally, Citi highlighted the company's operational efficiencies, which have contributed to an expansion in GPU. These efficiencies are attributed to fundamental improvements across Carvana's operations, with expectations for further gains.
Despite the positive adjustments and Carvana's stock performance, which saw a 35% increase since September 10, compared to a 4% rise in the S&P 500, Citi remains cautious. The firm advises an opportunistic approach in the event of any significant decline in Carvana's share price, reiterating its Neutral/High Risk rating but acknowledging the potential for margin expansion and increased demand.
In other recent news, Carvana has been the focus of several financial reviews and projections. Evercore ISI maintained its In-Line rating for the company, citing industry developments such as CarMax (NYSE:KMX)'s earnings release and a decline in consumer confidence. BNP Paribas (OTC:BNPQY) Exane also maintained a neutral stance on Carvana's shares, highlighting its significant relationship with Ally Financial (NYSE:ALLY).
BofA Securities reinstated coverage on Carvana with a Buy rating, citing potential for long-term growth in the expansive used car market. Evercore ISI increased its price target for Carvana, attributing this to tightened lending practices and increased web traffic. Stephens initiated coverage on Carvana with an Overweight rating, projecting EBITDA profitability for the company by the end of the year.
Carvana's management has provided guidance for third-quarter unit sales to exceed the second quarter's performance, indicating a year-over-year growth rate of over 25%. The company's projections for 2024 EBITDA range between $1 billion and $1.2 billion, surpassing the consensus estimate of $890 million. These recent developments highlight the ongoing financial assessments and expectations surrounding Carvana.
InvestingPro Insights
Carvana's recent performance aligns with several InvestingPro metrics and tips, providing additional context to Citi's upgraded price target. The company's revenue growth of 14.89% in Q2 2024 supports Citi's projection of increased unit sales. Moreover, Carvana's EBITDA growth of 278.35% over the last twelve months as of Q2 2024 underscores the operational efficiencies mentioned in the article.
InvestingPro Tips highlight that Carvana is "Trading at a low P/E ratio relative to near-term earnings growth," which could explain Citi's optimistic outlook despite maintaining a Neutral rating. Additionally, the tip indicating "Analysts predict the company will be profitable this year" aligns with the positive sentiment surrounding Carvana's performance.
It's worth noting that Carvana's stock price has shown significant momentum, with a 363.1% return over the past year and a 234.25% return year-to-date. This exceptional performance supports Citi's observation of the stock's 35% increase since September 10.
For investors seeking a more comprehensive analysis, InvestingPro offers 19 additional tips for Carvana, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.