On Thursday, RBC Capital Markets adjusted its price target for Carvana Co. (NYSE:CVNA), an e-commerce platform for buying and selling used cars, increasing it to $130 from the previous $90 while maintaining a Sector Perform rating on the stock. The adjustment follows Carvana's first-quarter earnings report, which the firm described as "pristine."
Carvana's recent quarterly results surpassed expectations in every category, with a notable pickup in volume growth. The company also showed improved gross profit per unit (GPU) and managed to keep incremental fixed costs minimal. These factors contributed to the analyst's decision to raise the price target.
The firm acknowledged that Carvana is tapping into profitability opportunities that were not previously anticipated. With the potential for retail unit growth to pick up speed again, there is an expectation that investors may become more enthusiastic about the company's prospects for market share gains. Currently, Carvana holds less than 1% of the market.
Despite the robust quarter and the increased profitability outlook, RBC Capital Markets signaled caution about getting too carried away with investor profit expectations, which appear to be surging for future years. The valuation of Carvana, at 24 times its projected 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA), was noted as not overly aggressive, even after the stock's movement in after-hours trading.
In summary, while RBC Capital has raised their estimates and price target for Carvana, they have opted to retain a Sector Perform rating, suggesting a neutral outlook on the stock despite the company's strong performance and improved financial metrics.
InvestingPro Insights
As Carvana Co. (NYSE:CVNA) continues to navigate the used car e-commerce market, recent data from InvestingPro provides valuable insights into their financial health and stock performance. The company's market capitalization stands at $17.78 billion, reflecting investor confidence in its business model. With a Price to Earnings (P/E) Ratio of 21.66, Carvana is trading at a low multiple relative to its near-term earnings growth, which may suggest an attractive valuation for investors seeking growth opportunities.
InvestingPro Tips highlight that while Carvana has seen a significant return over the last week, with a 12.37% price total return, analysts remain cautious as the company is not expected to be profitable this year. Additionally, Carvana's stock is known to exhibit high price volatility, which could be a consideration for risk-averse investors. However, it's worth noting that Carvana's liquid assets exceed its short-term obligations, indicating a stable financial position in the near term.
For those interested in a deeper analysis, InvestingPro offers additional tips and metrics for Carvana, providing a more comprehensive look at its financial performance and stock valuation. Readers can unlock these insights and save on their subscription by using the promo code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 15 additional InvestingPro Tips available, investors can make more informed decisions backed by real-time data and expert analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.