On Monday, Morgan Stanley updated its view on Carvana Co (NYSE:CVNA), a leading e-commerce platform for buying and selling used cars. The firm increased its price target on the company's shares to $75.00, a significant jump from the previous $45.00, while maintaining an Underweight rating.
The adjustment in the price target comes after Carvana's shares surged to $120 following a robust first quarter. Morgan Stanley's analysis revisited Carvana's financials from April 2022, when the stock previously traded around the $100 mark, evaluating the company's earnings, growth trajectory, and balance sheet then compared to the current state.
Despite the increase in the price target, Morgan Stanley remains cautious, citing the valuation as a reason for their continued Underweight rating. The firm's statement noted that even with the improved price target, the stock's trading at more than 30 times its forecasted fiscal year 2025 EBITDA (earnings before interest, taxes, depreciation, and amortization) is a factor that prompts them to remain on the sidelines.
The new price target reflects an acknowledgment of Carvana's performance and its position in the market compared to the previous year. However, the Underweight rating indicates that Morgan Stanley advises investors to be mindful of the company's high valuation relative to its earnings potential.
InvestingPro Insights
As Carvana Co (NYSE:CVNA) continues to navigate the dynamic used car market, real-time data from InvestingPro provides additional context to Morgan Stanley's recent analysis. The company's Market Cap stands at $24.88 billion, with a notable Price to Earnings (P/E) Ratio of 76.96. Despite a recent surge in share price, the P/E Ratio based on the last twelve months as of Q1 2024 is at -32.84, reflecting the challenges in profitability that analysts have noted.
InvestingPro Tips highlight that while Carvana trades at a low P/E ratio relative to near-term earnings growth, the stock is currently in overbought territory according to the RSI, and suffers from weak gross profit margins with only 17.58% as of the last twelve months. Additionally, the company has experienced significant returns over various periods, with a one-year price total return of 1257.92%, underlining the stock's high volatility.
Investors looking to delve deeper into Carvana's financials and forecasts can find over 20 additional InvestingPro Tips by visiting https://www.investing.com/pro/CVNA. To access these insights and more, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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