On Tuesday, Carvana Co. (NYSE:CVNA) stock saw an adjustment in their market outlook as Jefferies shifted its perspective on the online used car retailer. The firm upgraded its rating from Underperform to Hold and significantly increased the price target for Carvana's stock to $85 from the previous $30.
The upgrade comes as Jefferies noted Carvana's recent expansion in Retail Gross Profit per Unit (GPU), which indicates that the company's operational adjustments might be leading to sustainable improvements in unit economics.
The analyst from Jefferies highlighted that Carvana's progress toward achieving positive cash flow has lessened downside risks, presenting a more balanced risk-reward scenario for investors.
While the revised estimate moves closer to consensus, the firm maintains some caution. The analyst cited concerns about potential pressures to unit economics that could arise if Carvana's growth rate accelerates. This factor has tempered the firm's outlook, preventing it from adopting a more optimistic stance on the stock.
The new price target of $85 reflects a significant upward revision and suggests that Jefferies sees a reduced likelihood of further declines in Carvana's stock price. This adjustment in valuation represents a substantial increase from the previous target and aligns with the firm's revised expectations for the company's financial performance.
Carvana, known for its e-commerce platform for buying and selling used cars, has been working on improving its financials and operational efficiency. The upgrade by Jefferies indicates that these efforts may be starting to bear fruit, as seen through the lens of the firm's updated analysis.
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