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On Tuesday, a Wedbush analyst increased the price target for Carvana Co. (NYSE:) shares to $50.00, up from the previous target of $40.00. The analyst maintained a Neutral rating on the stock. This adjustment comes as Carvana’s shares have seen a year-to-date performance that has surpassed the index, with a 7% increase compared to the index’s 1% rise. The adjustment in the price target reflects a response to recent sales trends observed in the company.
Carvana, an online used car retailer, is expected to release its fourth-quarter earnings for the fiscal year 2023 after the market closes on Thursday, February 22. The analyst’s revision of estimates for Carvana ahead of its earnings report suggests cautious optimism, noting stronger sales trends in recent weeks. However, there is an acknowledgment that the boost in sales might be temporary.
The analyst’s commentary highlighted a belief that Carvana has the potential to sustainably accelerate its retail unit growth to double digits. This growth is expected to occur without negatively impacting the company’s gross profit per unit (GPU) and selling, general and administrative expenses (SG&A), ultimately contributing to EBITDA. EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, is a widely used performance metric in the automotive retail industry.
Despite the positive sales trends, the analyst’s forecast for Carvana’s fourth quarter remains slightly below the consensus. This conservative stance extends to the forecast for the full year 2024, which is also projected to be modestly below the consensus. The report implies careful monitoring of Carvana’s performance metrics as the market anticipates the upcoming earnings announcement.
Investors and market watchers are now looking forward to Carvana’s earnings report to gauge whether the company can meet these expectations and continue its growth trajectory as suggested by the revised price target.
InvestingPro Insights
As Carvana Co. (NYSE:CVNA) gears up to release its fourth-quarter earnings, investors are closely scrutinizing the company’s financial health and market performance. According to the latest data from InvestingPro, Carvana’s market cap stands at an impressive $10.56 billion, indicating a significant presence in the online used car retail space. Despite this, the company’s P/E ratio remains negative at -23.46, reflecting the challenges it faces in achieving profitability. Moreover, Carvana’s revenue has seen a contraction, with a -22.98% change over the last twelve months as of Q1 2023, underscoring the sales decline anticipated by analysts.
From an operational perspective, Carvana’s gross profit margin is reported at 13.55%, which is relatively low and aligns with the InvestingPro Tip highlighting the company’s weak gross profit margins. However, it’s worth noting that Carvana has managed to deliver a high return over the last year, with a 1-year price total return of 361.57%, showcasing the stock’s high volatility that traders may find attractive.
Investors considering Carvana as part of their portfolio should be aware of these key metrics and the additional 14 InvestingPro Tips available on the platform, which provide deeper insights into the company’s financial and market performance. For those looking to explore these tips further, there’s an opportunity to use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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This story originally appeared on Investing
