Carvana (NYSE:CVNA) gained a new endorsement from BTIG as the company’s vertically-integrated and owned-asset model provides “superior unit economics, a better user experience, and stronger managerial execution” compared to other less integrated models in the used car marketplace.
“These advantages are especially critical in used car retailing which involves numerous steps and as every minute a car sits unsold costs money,” BTIG said in Friday’s research note, adding that the car retailer’s in-sourced business model is “simply a better mousetrap in an enormous [total addressable market] that investors shouldn’t overlook.”
BTIG rates Carvana (CVNA) as a Buy, setting a target price of $155, a 20% premium to Thursday’s close. Shares are up 8%.
Although the stock trades at a premium to most e-commerce and auto-related stocks, Carvana (CVNA) has already achieved “industry-leading” EBITDA margins with just 1% of the used car market, and 6% of the digital TAM for used cars.
Compared to CarMax (KMX), Carvana (CVNA) has higher front-end margins and more than 2 times the EBITDA per unit despite selling half as many cars.
Carvana (CVNA) shares set a new 2-year high Friday and have gained 70% since reporting its “best results in company history.” The company swung to a profit as revenue increased by 17.2% year-over-year, launching the stock as much as 40% higher from the previous close. The company was subsequently upgraded by several Wall Street analysts, who consider the company a “secular growth story with a cyclical recovery kicker.”
Since the beginning of the year, Carvana (CVNA) shares have significantly outperformed peers in the category with a 145% YTD gain versus Carmax (KMX), up just 5.5% YTD, -18% YTD for Lithium Motors (LAD), -4% for AutoNation (AN), +11% for Group 1 Automotive (GPI), and -3% for Asbury Automotive Group (ABG).