Gold prices bounce off 3-week lows; demand likely longer term
On Thursday, Evercore ISI analyst Michael Montani increased the price target for Carvana shares (NYSE: CVNA) to $280 from $245, while maintaining an In Line rating. According to InvestingPro data, Carvana currently trades at a P/E ratio of 150x, suggesting a premium valuation, with the stock up over 126% in the past year. Montani highlighted Carvana’s significant share gain and profit ramp as key factors for the raised target, noting the company’s used car unit growth rate outpacing the industry by four to six times. The analyst pointed out that Carvana’s total gross profit per unit (GPU) rose 8% year-over-year to $6.9k, and retail GPU increased by 4% to $3.2k, surpassing expectations and demonstrating the benefits of scale and margin levers. The company’s revenue growth of 27% and gross profit margin of 21% in the last twelve months support this strong performance trajectory.
The efficiency of Carvana has also seen improvement, with selling, general, and administrative expenses per unit approximately $1k lower year-over-year. EBITDA dollars surged by 110% year-over-year, and a three percentage point increase in rate supports the potential for a long-term EBITDA margin exceeding 13.5%. Montani mentioned that ancillary streams such as third-party logistics, marketplace, and reconditioning could potentially add 50 to 100 basis points of margin.
Despite the positive outlook, the analyst cautioned about several risks, including the impact of tariffs on the broader economy and auto retail, shaky subprime credit quality, and the possibility of a recession, which investor discussions suggest has a 40-60% chance of occurring. InvestingPro analysis reveals that while Carvana maintains a strong current ratio of 3.64x and operates with moderate debt levels, its stock exhibits high price volatility with a beta of 3.62. Additionally, the entry of Amazon (NASDAQ:AMZN) into new vehicle sales through a partnership with Hyundai (OTC:HYMTF) raises concerns about potential competition in the used car market.
Montani concluded that Carvana’s strong first-quarter performance, market share gains, and solid EBITDA generation indicate progress towards profitable growth. While acknowledging the risks of a volatile tariff environment, consumer credit behavior, and high expectations, the analyst believes that Carvana’s growth in capacity and development of alternative profit streams justify its elevated valuation in a stable industry backdrop. InvestingPro subscribers can access 15+ additional ProTips and a comprehensive analysis of Carvana’s financial health, which currently rates as "GREAT" with an overall score of 3.01 out of 5.
In other recent news, Carvana Co (NYSE:CVNA) reported impressive financial results for Q1 2025, exceeding both earnings and revenue forecasts. The company’s revenue reached $4.232 billion, surpassing the expected $3.91 billion, marking a significant achievement. Carvana also saw a 46% year-over-year increase in retail units sold, totaling 133,898 units. Additionally, the company’s adjusted EBITDA more than doubled from the previous year, reaching $488 million. This marks Carvana’s fifth consecutive quarter of positive net income. The company is optimistic about its growth prospects, aiming to expand its production capacity and targeting 3 million annual retail sales within the next 5 to 10 years. Analysts have shown confidence in Carvana, with firms like Citi and JPMorgan engaging in discussions about the company’s future strategies and market position. Carvana’s management remains focused on capturing market share in the competitive automotive retail sector, even as they navigate potential challenges such as supply chain issues and economic conditions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.