On Thursday, Piper Sandler adjusted its outlook on Carvana Co. (NYSE:NYSE:CVNA), a leading e-commerce platform for buying and selling used cars, by raising the price target to $225 from $151. The firm maintained a Neutral rating on the stock despite the price target increase.
The revision follows Carvana's third-quarter results, which surpassed both Piper Sandler's and consensus estimates, leading to a 20% indication of higher stock value. The analyst cited improved execution and margins as the reasons for the adjustment in estimates.
Carvana's recent performance suggests that the company could potentially reach its maximum reconditioning capacity of 3 million units per year and might even surpass the upper end of its EBITDA margin guidance. These outcomes are considered plausible given the company's current trajectory.
The new price target is based on a Discounted Cash Flow (DCF) analysis, which has been raised in light of Carvana's stronger-than-anticipated quarter. However, the analyst also expressed caution, indicating that the current valuation leaves little room for further stock price appreciation and advised against bidding the stock higher.
InvestingPro Insights
Carvana's recent performance has not only caught the attention of analysts but is also reflected in the company's financial metrics. According to InvestingPro data, Carvana's stock has shown remarkable strength, with a 667.81% price total return over the past year and a 150.01% return in the last six months. This aligns with the analyst's observation of the company's improved execution and margins.
The company's revenue for the last twelve months as of Q2 2024 stood at $11.67 billion, with a gross profit margin of 18.77%. Notably, Carvana's EBITDA growth was an impressive 278.35% during the same period, underscoring the company's ability to enhance its operational efficiency.
InvestingPro Tips highlight that Carvana is trading near its 52-week high, which corroborates the analyst's caution about limited room for further stock price appreciation. Additionally, the stock's RSI suggests it may be in overbought territory, further supporting the analyst's advice against bidding the stock higher at current levels.
It's worth noting that while Carvana has shown strong returns, it operates with a moderate level of debt and its net income is expected to drop this year. These factors may contribute to the analyst's decision to maintain a Neutral rating despite raising the price target.
For investors seeking 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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