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JPMorgan upgrades Carvana Co.,New York Stock Exchange: CVNA) to a Neutral rating on Monday after online auto stocks were set to Underweight.
Analyst Rajat Gupta said investors today better appreciate the known unknowns around the Carvana (CVNA) story, and The company believes it is possible that CVNA can navigate the uncertain macroeconomic and used car industry phase in a manner that limits estimate downsides.
“We believe Carvana's approach to used vehicle retail has given it a multi-year head start in the online-only space of a fragmented used vehicle industry, allowing it to expand at a rapid pace, although this had a cost that has now come to harm during a sharp decline in industry volumes due to higher tariffs and prices.”
While JPMorgan believes Carvana's (CVNA) investments in infrastructure/networks, including the recent acquisition of ADESA's physical auction business, could give it a long-term competitive advantage, the company's business model is not considered much superior. or disruptive to the market, with Well-capitalized traditional traders find ways to grow and generate solid returns in an increasingly competitive environment.
Higher interest rates and a pause in investments to manage profitability are expected to limit CVNA's volume growth, while the valuation is still considered relatively rich. Those factors kept JPMorgan from becoming bullish on Carvana (CVNA) yet.
Carvana (CVNA) Stock Rises 5.51% in premarket trading Monday at $37.15.
