Needham upgrades Carvana to Buy on ‘profitable secular growth story’

Needham upgraded Carvana to Buy from Hold with a $160 price target, which is a high on the Street. The analyst thinks Carvana can grow unit sales and industry share by leveraging its digital-first customer experience and “under-utilized” physical footprint. After a volatile past, the Carvana is becoming a “profitable secular growth story,” with increasing retail unit sales and improving gross profit per unit metrics from leveraging a high-fixed-cost base, the analyst tells investors in a research note. The firm thinks the consensus retail unit estimate has troughed, and does not yet anticipate the approaching recovery, upside from management’s pivot to unit growth and optimizations at acquired inspection and reconditioning centers and Adesa locations, or the benefits of a stabilized balance sheet.