Carvana’s stock rally continues, but analysts aren’t buying in just yet

Carvana Co.’s stock added more gains Friday after a whopping 56% rally in the previous session, as analysts issued positive comments and lifted some of their performance estimates for the used-car seller — but held off on any rating upgrades.

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Carvana was up about 4% in regular trading on Friday, and was one of the most active in premarket action.

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On Thursday, the stock jumped on a hiked outlook from the car seller.

William Blair analyst Sharon Zackfia reiterated a market perform rating on Carvana and said the company’s progress was encouraging — but added she was seeking improved visibility on liquidity and free cash flow generation before any potential stock upgrade.

William Blair upped its second-quarter adjusted gross profit per unit (GPU) estimate for Carvana to about $6,040 versus nearly $5,100 previously.

William Blair also increased its projection for Carvana’s adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) to nearly $83 million, from an earlier view for a loss of $6 million on second-quarter used units sold of 78,000.

Raymond James analyst Mitch Ingles reiterated a market perform rating on Carvana and hiked his outlook for the company’s adjusted Ebitda and gross profit per unit but said the company continues to face challenges.

“Even if CVNA manages to achieve positive adjusted Ebitda in 2023, “it comes at the expense of revenue growth, which we estimate to be down 26% via market share losses on reduced inventory count and advertising,” Ingles said.

Meanwhile, JPMorgan analyst Rajat Gupta reiterated a neutral rating on Carvana and said the company’s stronger projection on gross profit per unit was primarily driven by higher-than-expected loan sales in the second quarter.

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