Carvana's Strong Q1 Performance Attracts Analysts Praise, Stock Soars

Carvana Co. CVNA shares are jumping today following yesterday’s first-quarter FY24 results. Several analysts raised the price target on the stock.

Carvana reported revenue of $3.061 billion, which beat the consensus estimate of $2.673 billion. The company reported adjusted EBITDA of $235 million.

The company anticipates a sequential increase in its year-over-year growth rate in retail units in the second quarter. The company also expects a sequential increase in adjusted EBITDA.

Wedbush analyst Seth Basham raised the price target from $80 to $120 while maintaining a Neutral rating.

The analyst writes that the company is better positioned to support growth than in the past, with better technology and processes in place and existing infrastructure to grow into. 

The analyst says that at this level of annualized EBITDA, the company can now cover its interest expense on outstanding debt in cash and plans to pay interest in cash on its 2028 and 2030 notes starting in 2025.

Consequently, the analyst now forecasts units sequentially increasing through the year (+24% Y/Y for FY24, up from +16% Y/Y prior) and adjusted EBITDA of $883 million (up from $568 million earlier). 

Needham analyst Chris Pierce reiterated the Hold rating and writes that Carvana has regained its position as the apex predator in used auto retailing with an ample runway for further unit growth and is now operating from a position of profitable growth. 

The analyst sees increasing flexibility with the company’s current debt picture, with an option for eventual refinancings, decreasing interest payments and pushing more earnings to bottom line.

Pierce says that they see a natural limit to gross profits, with the company ‘competing for inventory from consumers and at auction while having to price similarly to peers at retail given readily available pricing information on aggregator sites.

The analyst expects the customer experience and integrated lending platform to aid Carvana in driving unit growth.

Also, JP Morgan increased the price target on Carvana from $70 to $130. JP Morgan analyst Rajat Gupta upgraded the stock from Neutral to Overweight.

 Investors can gain exposure to the stock via Global X E-Commerce ETF EBIZ and Amplify ETF Trust Amplify Online Retail ETF IBUY.

Price Action: CVNA shares are trading up 32.9% to $115.71 at the last check Thursday. 

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