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Carvana Soars 31% On Record 3Q Business Prediction

Carvana stock rose 30.6% on Tuesday after the company provided a business update indicating record 3Q results. The stock is down 2.4% in pre-market trading today.

The online used-car retailer Carvana (CVNA) did not provide any specific numbers but stated that it expects to achieve “company records” in 3Q performance across several key metrics, including retail units sold, total revenue, total gross profit per unit or GPU and EBITDA margin. The company also expects to breakeven on EBTIDA basis in 3Q.

“The momentum that we saw in the second quarter accelerated into the third, leading to record performance for Carvana in metrics that demonstrate strong progress both in growth and towards profitability,” said Ernie Garcia, Carvana founder and CEO. In 2Q, Carvana’s revenue grew 13.4% Y/Y to $1.12 billion.

Separately, the company also announced that it plans to offer up to $1.0 billion in aggregate principal amount of senior notes, of which half will be due in 2025 and the other half in 2028.

On Tuesday, Goldman Sachs analyst Daniel Powell upgraded Carvana to Buy from Hold and raised the price target to $205 from $178. The analyst stated, “We see a long runway for growth in this category, and believe valuations have over-corrected for VRM and CVNA as our gross profit estimates have moved higher.”

He added, “We continue to see dynamics surrounding COVID-19 accelerating the shift online in used autos, but beyond that we expect Carvana and Vroom to drive the shift online by leveraging national scale to aggregate demand in a highly fragmented market and take share from the long-tail of small dealers and peer-to-peer market." (See CVNA stock analysis on TipRanks)

In reaction to yesterday’s update, JMP Securities analyst Ronald Josey raised Carvana’s price target to $250 from $200 and maintained a Buy rating. Josey explained that his inventory tracking had already forecasted improving trends, but he is most surprised with Carvana's improvement in GPU and sees the company's newer programs like Trade-in, CarvanaAccess, and ongoing tests around 3P listings adding to its profitability.

Overall, the Street has a Moderate Buy consensus for Carvana with 12 Buys, 5 Holds and no Sell ratings. Carvana stock has risen by a stellar 146% year-to-date, so the average analyst price target of $215.06 implies a potential downside of 5% from the current levels.

This image has an empty alt attribute; its file name is Carvana.png
This image has an empty alt attribute; its file name is Carvana.png

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