Carvana shares drive higher after the used car seller gets the green light from Wall Street
Morgan Stanley says the company’s growth is “more than just a phenomenon.”
Carvana shares jumped as much as 5% before losing some steam after Morgan Stanley’s Adam Jonas upgraded the company.
Carvana lets buyers shop, sell, and trade cars online, which can be delivered at home or picked up at an eight-story car vending machine, but has recently dealt with scrutiny from short sellers and regulators, the latter of which culminated in a $1.5 million settlement with the Connecticut Attorney General to settle consumer complaints about delays in title and registration documents.
Jonas moved the stock to “overweight” from “equal weight” and raised the price target to $280 from $260, suggesting a 31% leap from Monday’s close.
Jonas sees Carvana as a “unique opportunity” in auto retail and fleet fulfillment, especially after the stock’s recent dip. Last month, shares took a 12% hit despite a strong earnings report as the company’s wholesale business failed to meet analysts’ expectations. The miss raised doubts about whether the company could justify the triple-digit stock rally over the past year.
While initially concerned about Carvana’s heavy debt load, Jonas is more optimistic now thanks to its strong cash flow, which helps manage its $5.6 billion debt. While Carvana still faces risks from from having subprime auto credit, Jonas said the company has “proven profitable growth is more than just a temporary phenomenon.”
Carvana shares are up 143% over the past year.
