Carvana is a ‘secular growth story with a cyclical upswing,’ says optimistic analyst

Shares Carvana Co (NYSE:CVNA) shares surged in pre-market trading on Wednesday after the company introduced a new shopping service.

Needham says the company should be able to generate sales growth and gain market share by leveraging digital customer service and its previously untapped physical presence.

This Caravan Analyst: Chris Pierce upgraded Carvana shares from “Hold” to “Buy” and set a price target of $160.

This Caravan Thesis: The company is “a secular growth story with a cyclical momentum to recovery,” Pierce said in a ratings upgrade note.

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Carvana is poised for profitable growth with “increased sales per unit and expansion of gross profit, while largely leveraging its fixed cost base,” he added.

The analyst wrote that the current consensus estimate does not reflect “Carvana’s impending recovery, the benefits of management’s clear shift toward unit growth and optimization at the acquired CVNA IRC and Adesa locations, or the benefits of a stabilized balance sheet.”

“Debt refinancing and lower interest rates are possible, and the economic situation and interest rates are improving,” he added.