Carvana 'Has A Lot To Prove': Wall Street Analyst Is Bearish Amid Used Car Price Challenges

Carvana Co. CVNA has successfully ramped up its cash reserves by trimming costs.

Yet the ongoing turbulence in the used car sector has Morgan Stanley analyst Adam Jonas pondering the sustainability of Carvana’s overarching strategy.

Morgan Stanley Issues Mixed Signals On Carvana

While Jonas acknowledges Carvana’s notable strides in both retail and wholesale Gross Profit per Unit (GPU), suggesting a brighter profitability horizon, the analyst emphasized the company still has “still has a lot to prove.”

In response to Carvana’s recent financial updates, Morgan Stanley adjusted its third-quarter total GPU projection to $5,266, up from an earlier $4,731.

Additionally, the firm’s estimate for the company’s third-quarter adjusted EBITDA has jumped to $75 million, a significant leap from the previous $27 million. This uptick is attributed to the rise in GPU and the uptick in depreciation, especially given the dip in used car values observed at Manheim this quarter.

Read also: This Is What Whales Are Betting On Carvana

Higher Price Target, Cautious Stance

Morgan Stanley reiterated an Underweight rating on Carvana and nudged its price target from $35 to $37.

“The stock’s reward- skew and downside to PT keeps us UW,” Jonas said.

The analyst highlighted the looming challenges in the used car landscape and expressed reservations about the long-term prospects of Carvana’s business blueprint.

CVNA Price Action: Carvana shares were trading 4.33% higher at $41.16 ahead of the close Friday.

Now read: Deflation Rocks Used Car Market, Price Bubble Bursts: 5 Stocks Face Margin Squeeze Risks

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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