Carvana: Morgan Stanley analysts upgrade rating to "Buy", stock rises

Carvana $CVNA , a pioneer in online used car sales, saw its stock price rise after Morgan Stanley raised its rating to "Buy" and target price to $280.

Strong improvement in financial performance:

Ebitda rose to $1.4 billion from $339 million

Expected Ebitda for 2025: $1.9 billion

Shares up nearly 450% year-over-year

Carvana $CVNA has undergone a significant transformation - a loss-making business has become profitable, helping to boost investor confidence.

Increased analyst rating as a catalyst for growth:

Morgan Stanley adjusts recommendation from "Hold" to "Buy"

Target price raised from $260 to $280

Average analyst target price: $279

Rating upgrades often lead to stock appreciation - for Carvana $CVNA this was aided by the recent price correction, which may have created an interesting entry point.

An innovator in online car sales

Minimizing costs, direct online sales, efficient fleet management

Building own logistics facilities

Strong growth in the digital market - more and more consumers are buying cars online

Risks of investing in Carvana:

High valuation - the stock trades at 27x expected Ebitda for 2025, well above the S&P 500 average (17x).

Strong volatility - shares fell more than 12% after the Feb. 19 earnings announcement, even though the numbers beat expectations.

Competitive pressure - traditional dealers (CarMax, AutoNation) and new online platforms may increase pressure on margins.

Long term (future of online car sales):

Carvana $CVNA has established itself as the leader of the online auto market.

Improving financial results are strengthening the company's fundamentals.

The high valuation suggests that growth must continue or a correction may occur.

Carvana $CVNA is a growth stock with strong momentum, but the valuation is high. The rating upgrade helps sentiment, but long-term success will depend on maintaining profitability and market share growth.