The Ratings Game: Carvana stock rallies after BofA analyst says buy ahead of earnings


Shares of Carvana Co. surged Monday, after BofA Securities analyst Nat Schindler turned bullish on the online car-buying company less than a week before first-quarter results are due, citing signs of “robust demand” and an inventory rebound.

Schindler raised his rating to buy from neutral, and lifted his price target to $350 from $285.

The stock

rose 3.5% toward a two-month high in afternoon trading. It has now climbed 23.2% year to date, while the S&P 500 index

has advanced 11.9%.

Schindler said he expects the latest round of stimulus checks, which amounted to an average of $5,600 for a family of four in the U.S., to give a boost to vehicle sales, at a time when shortages of semiconductors used in auto making have limited supply.

“While demand remained remarkably resilient…the U.S./[North America] industry environment for the first few months of 2021, production remains much challenged due to semiconductor shortages and other supply chain disruptions,” Schindler wrote in a note to clients. “The resulting tighter supply supports used car sales and shifts competitive emphasis in 2021 to inventory levels.”

Don’t miss: Global chip shortage plaguing auto makers expected to worsen.

Schindler said that based on recent U.S. industry data on sales and pricing, he believe it is likely that Carvana will likely report unit sales and gross profit per unit (GPU) growth that are above expectations.

Carvana is slated to report first-quarter results after the May 6 closing bell. The average estimate of analysts surveyed by FactSet is for a per-share loss of 69 cents, after a loss of $1.18 a share in the year-ago period, on revenue of $1.94 billion, representing 77% growth. The FactSet consensus for retail unit sales is 86,494 and for GPU is $3,413.

The company said in February that it expects 2021 revenue growth to be in line with units sold growth, and total GPU in the mid-$3,000s.

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