BofA lifts Carvana stock target to $375, maintains buy rating

On Tuesday, BofA Securities analyst Michael McGovern increased the price target for Carvana shares (NYSE: NYSE:CVNA) to $375 from the previous $325, while reiterating a Buy rating on the stock. Currently trading near $340, the stock has demonstrated remarkable strength with a 215% return over the past year. According to InvestingPro data, analyst targets for the stock range from $108 to $400, reflecting diverse market opinions. McGovern cited several factors that could contribute to the company’s continued growth and market share gains, despite potential risks in the second half of the year due to tightening new car supply shipments observed in May. The company’s strong financial health is evidenced by its perfect Piotroski Score of 9, as reported by InvestingPro, along with impressive revenue growth of 32% in the last twelve months.

McGovern noted that a shift from new to used cars could benefit Carvana, a trend that the company may capitalize on to enhance its market presence. He also highlighted that Carvana is now eligible for inclusion in the S&P 500 index, although no changes were made by the S&P Committee this quarter. Additionally, the potential for a car loan interest deduction was mentioned as a possible relief for borrowers, which could further support Carvana’s business.

The raised price objective is grounded in a discounted cash flow (DCF) analysis, which now assumes a 19% compound annual growth rate (CAGR) in revenue through 2032, an increase from the previous estimate of 18.3%. Furthermore, the DCF analysis includes a one-turn higher 18x terminal multiple, compared to the prior 17x, while the weighted average cost of capital (WACC) remains unchanged at 13%.

McGovern’s analysis suggests that Carvana is nearing a 5% market share in its largest market, Atlanta, and the new price target is based on the expectation that the company will achieve this level of market penetration. The Buy rating is reiterated as BofA Securities maintains a positive outlook on Carvana’s stock, signaling confidence in the company’s future performance. With a healthy current ratio of 3.81 and strong earnings growth expectations, the company appears well-positioned for continued expansion. For deeper insights into Carvana’s financial health and growth prospects, investors can access comprehensive analysis and 23 additional ProTips through InvestingPro’s detailed research reports.

In other recent news, Carvana has been the focus of several analyst updates following its impressive financial performance. RBC Capital Markets increased its price target for Carvana to $340 from $320, maintaining an Outperform rating, citing strong first-quarter results and potential for future growth. Similarly, Morgan Stanley (NYSE:MS) raised its price target to $290, highlighting a record quarter and a positive long-term outlook. Jefferies also adjusted its price target to $315, although it retained a Hold rating, noting a slight moderation in growth expectations. Meanwhile, DA Davidson reiterated a Neutral rating with a $260 price target, acknowledging Carvana’s strong performance this earnings season.

In other developments, Bank of America analysts identified Robinhood Markets (NASDAQ:HOOD) as a leading candidate for inclusion in the S&P 500 index during the upcoming rebalancing. This potential inclusion could lead to significant buying activity from passive funds, further impacting Robinhood’s market position. Carvana was also mentioned as a potential candidate for S&P 500 inclusion, reflecting its growing prominence in the market. These updates offer investors insights into the evolving landscape and potential opportunities within the financial and automotive sectors.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.