Carvana Upgraded to Outperform at Wedbush

RBC Capital Markets upgraded Carvana (NYSE:CVNA) from Underperform to Sector Perform, citing an improved risk-reward outlook. Shares gained more than 7% on Friday. The bank expressed optimism that the stock could rise further before valuation concerns resurface, making a bearish stance challenging to justify for now.

The analysts highlighted the potential for Carvana's return to significant unit growth to positively impact its stock price, especially considering the high short interest in the company. They also suggested that Carvana's cash generation per vehicle might be stronger than widely assumed.

With an estimated $7.4 billion in obligations over the next seven years, recent boosts in profitability per car could help Carvana manage its debt payments. Additionally, the analysts pointed out that an increasing stock price could enhance Carvana's liquidity situation, potentially easing its access to capital markets.

Carvana (NYSE:CVNA) shares jumped more than 33% intra-day today after the company provided better-than-expected guidance, despite its fourth-quarter results missing Wall Street estimates.

Q4 EPS came in at ($1.00), falling short of the analyst prediction of ($0.80). The company's revenue for the quarter was reported at $2.42 billion, not meeting the expected $2.56 billion.

Looking into the future, amidst ongoing macroeconomic and industry uncertainties, Carvana provided an outlook for the first quarter of 2024, expected an increase in retail units sold compared to the same period last year, and an adjusted EBITDA well over $100 million.

This forecast is based on the performance observed in the early part of Q1. The company expects the Retail Gross Profit per Unit (GPU) to be similar to Q4 levels, with potential for improvement. It also anticipates sequential growth in Wholesale GPU and Other GPU, alongside a decrease in Selling, General, and Administrative (SG&A) expenses per retail unit sold.

For the full year of 2024, Carvana is aiming for an increase in both the number of retail units sold and adjusted EBITDA in comparison to the previous year.

Carvana (NYSE:CVNA) was downgraded by Jefferies analysts, who expressed skepticism about the company's current situation and asserted that Wall Street's estimates are overly optimistic.

The analysts downgraded their rating from Hold to Underperform and significantly lowered the price target from $55 to $30 per share. The analysts' rationale for the downgrade lies in the belief that the consensus is overestimating the sustainability of the recent surge in profitability, which the analysts attribute to temporary tailwinds that are expected to diminish in the upcoming quarters. Despite assuming that per unit economics will remain better than pre-pandemic levels, the analysts’ revised 2024 GPU/EBITDA estimates are considerably lower than the Street's projections.

Carvana (NYSE:CVNA) shares jumped more than 40% today after the company reported its Q2 earnings results, with EPS of ($0.55) coming in better than the Street estimate of ($1.15). Revenue was $2.97 billion, beating the Streets estimate of $2.6 billion.

DA Davidson analysts increased their price target to $60 from $18, while reiterating their Neutral rating on the stock. According to the analysts, Carvana has completed the initial phase of its turnaround and is progressing well toward the next phase. The company has improved its financial position by shifting its focus from top-line growth to profitability. Additionally, Carvana has undergone a favorable capital restructuring and shows signs of improved industry trends or at least less negative trends.

Carvana (NYSE:CVNA) shares jumped more than 40% today after the company reported its Q2 earnings results, with EPS of ($0.55) coming in better than the Street estimate of ($1.15). Revenue was $2.97 billion, beating the Streets estimate of $2.6 billion.

DA Davidson analysts increased their price target to $60 from $18, while reiterating their Neutral rating on the stock. According to the analysts, Carvana has completed the initial phase of its turnaround and is progressing well toward the next phase. The company has improved its financial position by shifting its focus from top-line growth to profitability. Additionally, Carvana has undergone a favorable capital restructuring and shows signs of improved industry trends or at least less negative trends.

Citi raised its price target on Carvana Co. (NYSE:CVNA) to $25.00 from $11.00 with a Neutral rating. Carvana's recently revised profitability outlook for Q2/23, driven by faster selling/securitizing of receivables, led to an expected adjusted EBITDA of $50 million.

The analysts believe that the company's optimistic forecast, which led to significant share price gains, may be a temporary positive. Carvana stated that they had sold or securitized loans totaling around $2 billion in the current quarter, which exceeded the $1.3 billion amount recorded on May 4th, 2023. The company credited its robust performance in the first quarter of 2023 to its ongoing focus on improving operational efficiencies.

Carvana (NYSE:CVNA) shares jumped more than 26% intra-day today following the announcement of improved Q2 guidance. The company revealed that it anticipates achieving adjusted EBITDA above $50 million for the quarter, along with non-GAAP total gross profit per unit surpassing $6,000. This represents a new company record and a remarkable improvement of over 63% compared to the second quarter of the previous year.

Carvana also reported that loans sold or securitized quarter-to-date amounted to approximately $2 billion, surpassing the $1.3 billion figure as of May 4th, 2023. The company attributed its strong performance in Q1/23 to a continued emphasis on operational efficiencies.