Carvana Co (NYSE: CVNA) has roughly tripled this year but a JPMorgan analyst remains convinced it’s not out of room to run just yet.
We come away from CVNA’s Rocklin, CA, IRC tour with higher conviction in our above consensus EBITDA.
Carvana stock could climb to $150
Rajat Gupta continues to rate CVNA at “overweight” and sees upside in its shares to $150 that translates to another 20% upside on their previous close.
The analyst cited positive outlook and recent operational efficiencies for his positive view on Carvana stock in a research note on Thursday.
More importantly, he expects efficiency to improve further as the used car retailer opens new Inspection and Reconditioning Centers (IRCs) and expands inventory.
Carvana shares do not, however, pay a dividend at writing.
Watch here: https://www.youtube.com/embed/m3T-_j2Z0_g?feature=oembed
CVNA is bolstering its balance sheet
JPMorgan is confident that Carvana can beat the current consensus estimates for EBITDA by some 15% on average through 2026.
Advancements in terms of logistics and deployment of tools to boost operational efficiency, the investment firm told clients in a note today, are already visible in the consistently improving retail gross profit per unit and SG&A per unit.
CVNA is committed to bolstering its balance sheet as well. In fact, it has raised $350 million in equity capital and repurchased about 24% of its Senior Secured Notes that are due to mature in 2028.
Note that Carvana stock traded at a high of $361 during the pandemic in 2021. Our market analyst Crispus Nyaga is also bullish on CVNA for 2024.
Carvana had a strong fiscal Q1
JPM’s bullish call on Carvana Co arrives more than a month after it reported its financial results for the first quarter that handily topped Street estimates. Ernie Garcia – chief executive of the New York listed firm said at the time:
With significant fundamental margin opportunities ahead, and a nationwide infrastructure that can support multiples of our current scale, we have never been more confident in our opportunity to become the largest and most profitable automotive retailer and to buy and sell millions of cars.
Rajat Gupta also expects the $2.2 billion acquisition of ADESA to help trim transportation expenses and grow the regional network of CVNA as well. Vehicle sourcing, he agreed, remains a meaningful challenge for Carvana stock, though.
Earlier this month, Landon Swan – the cofounder of LikeFolio said Carvana is “crushing” CarMax Inc after the latter came in shy of Street estimates for quarterly revenue and reported a significant year-on-year hit to per-share earnings as well
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