Jefferies analyst John Colantuoni upgraded the rating on Carvana Co (CVNA – Research Report) to a Hold today, setting a price target of $85.00.
John Colantuoni has given his Hold rating due to a combination of factors influencing Carvana Co’s (CVNA) current and future financial position. The analyst acknowledges CVNA’s operational adjustments, which have led to a notable expansion in Retail Gross Profit per Unit (GPU), suggesting that these improvements may be long-term rather than transient. The company’s guided performance has outpaced previous expectations, with Retail GPU reaching new highs for the fourth consecutive quarter. This growth is attributed to strategic cost reductions in retail reconditioning and transport, alongside gains from process standardization and logistics efficiencies. Additionally, the company has achieved better inventory turnover rates and increased revenue from shipping fees.
Moreover, Colantuoni’s reassessment of Carvana’s risk profile is a critical factor in the Hold rating. The analysis suggests a reduced likelihood of cash shortfalls, as Carvana shows signs of transitioning towards a self-financing model. This shift implies Carvana could use operational cash flows to fund growth and manage debt obligations, thereby minimizing the risk of another dilutive equity offering. Consequently, this leads to a more balanced risk-reward outlook. While the higher expected Retail GPU and Gross Profit have led to an increase in projected EBITDA, aligning it with consensus estimates, there remains concern about potential pressure on unit economics as growth accelerates, which prevents an outright Buy recommendation at this time.
Colantuoni covers the Consumer Cyclical sector, focusing on stocks such as TripAdvisor, Booking Holdings, and Carvana Co. According to TipRanks, Colantuoni has an average return of 4.1% and a 59.44% success rate on recommended stocks.
In another report released on March 7, RBC Capital also upgraded the stock to a Hold with a $90.00 price target.
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Carvana Co (CVNA) Company Description:
Founded in 2012, Arizona-based Carvana Co. is an e-commerce platform for buying and selling used cars in the United States. Carvana.com enables consumers to quickly and easily shop more than 20,000 vehicles, finance, trade-in or sell their current vehicle to Carvana, sign contracts, and schedule as-soon-as-next-day delivery or pickup at one of Carvana’s patented, automated Car Vending Machines.
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