The average target price of CVNA is 292 and suggests 15% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 400.0. This translates into 17% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 108.0. This is equivalent to 68% downside potential in the worst case. 

Carvana Co., together with its subsidiaries, operates an e-commerce platform for buying and selling used cars in the United States. The company's platform allows customers to research and identify a vehicle; inspect it using company's 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile devices. Carvana Co. was founded in 2012 and is headquartered in Tempe, Arizona.

Carvana Co.

Consumer Cyclical

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

CVNA reported revenue of USD 14 844mn in the last 12 months, up 9% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 81% from FY24 to USD 3.06. Market expects EPS to reach USD 1.58 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 45ppts and its growth accelerated by 4ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is mildly favourable.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 9.7% in the last 12 months, a decline from 9.9% in FY23. 

Historically, CVNA has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 2.7%, down from 3.0% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 5.0% in the last 12 months, an increase from 4.1% in FY23. The market analysts predict that RoA will be 7.0% in FY24, more robust than its peers in this period. 

Carvana Co. reported a return on equity (RoE) of 45.6% in the last 12 months, up from -235.6% in FY23. The market consensus projects an RoE of 202.9% in FY24, again ahead of its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 6.1%, below the peers. The consensus estimate for FY24 for RoCE is 19.7%, however, this time ahead of the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.2 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

CVNA boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually quite stable and remains favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, solid return on capital, and low margin volatility, among the positive credit factors. Among the negative credit factors, we point to bleak profitability, inadequate interest coverage, and an unfavourable capital structure.

In highly turbulent market conditions, CVNA is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, CVNA is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, overvalued on P/FCF. 

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Carvana Co.

$ 347.52

2

Carvana Co.

$ 347.52

2

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$ 347.52

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