On Tuesday, Evercore ISI updated its price target for Carvana (NYSE:CVNA), increasing it to $190 from $186 while maintaining an In Line rating for the stock. The firm anticipates a positive third-quarter earnings report from Carvana, which is scheduled to be released after the market closes on Wednesday. The forecast includes a 33% growth in retail used unit sales and an EBITDA margin of 9.6%, suggesting a trajectory towards the higher end of the company's EBITDA target range of 8-13.5%.
The analyst from Evercore ISI highlighted several factors that could potentially impede Carvana's momentum, including the election cycle, rising auto loan delinquencies, and operational challenges. Despite these risks, the firm remains optimistic about Carvana's execution, citing a recent visit to the company's headquarters that reinforced this view.
The revised price target reflects a valuation of approximately 3.2 times enterprise value to sales (EV/S), which is a premium compared to Carvana's digital peers. This adjustment is based on the potential for market share gains and margin expansion in the used vehicle industry, which is valued at over $1 trillion and consists of more than 40 million units. Evercore ISI expects Carvana to achieve significant retail used unit share gains in the second half of 2024 and beyond.
The update comes as Carvana's stock has seen a 20% increase over the past month, contrasting with a 5% decline in the stock of its competitor, KMX. This positive sentiment is set against the backdrop of a recovering and highly fragmented used vehicle market where Carvana is poised to capitalize on its growth and performance.
In other recent news, Carvana has seen a flurry of activity from analyst firms. Wells Fargo (NYSE:WFC) has raised its price target for the company to $250, citing improved fundamentals and long-term growth potential. The firm also increased its earnings per share (EPS) estimates for fiscal years 2024 and 2025 to 72 cents and $2.22, respectively. BofA Securities also increased its price target for Carvana to $210, highlighting the company's market strategy. However, Citi maintains a neutral stance on Carvana, despite these positive adjustments.
Stephens reaffirmed its Overweight rating on Carvana, maintaining its $190 price target. The firm likened Carvana's business model to the successful tactics employed by McDonald's (NYSE:MCD) in the past. In the midst of these analyst updates, Carvana announced it has reached a milestone of four million online vehicle transactions since its inception.
The company's management projects a year-over-year growth rate of over 25% for third-quarter unit sales and EBITDA for 2024 between $1 billion and $1.2 billion, surpassing the consensus estimate of $890 million.
InvestingPro Insights
Carvana's recent performance aligns with several key metrics and insights from InvestingPro. The company's stock has shown remarkable strength, with a 22.95% price return over the past month and an impressive 630.37% return over the last year. This performance is consistent with Evercore ISI's optimistic outlook and increased price target.
InvestingPro data reveals that Carvana's revenue for the last twelve months as of Q2 2024 stands at $11.67 billion, with a quarterly revenue growth of 14.89% in Q2 2024. This growth trajectory supports the analyst's expectation of a 33% increase in retail used unit sales for the upcoming earnings report.
An InvestingPro Tip indicates that Carvana is trading at a low P/E ratio relative to near-term earnings growth, which could be interpreted as a positive sign for potential investors. However, it's worth noting that the stock is also trading near its 52-week high, with a price at 99.78% of its 52-week high value.
For readers interested in a more comprehensive analysis, InvestingPro offers 19 additional tips for Carvana, providing a deeper understanding of the company's financial health and market position.
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