Carvana Stock Drives Higher On Analyst Upgrade

Zinger Key Points
  • Carvana shares climb after RBC Capital upgraded the stock from Underperform to Sector Perform and raised its price target from $45 to $90.
  • RBC Capital analyst Brad Erickson says the bear case for the stock has become “increasingly unprovable."

Carvana Co. CVNA shares are trading higher Friday after RBC Capital upgraded the stock from Underperform to Sector Perform and raised its price target from $45 to $90.

The Details:

RBC Capital analyst Brad Erickson said the bear case for the stock has become "increasingly unprovable," and Carvana's recent rally has the potential to continue even higher. The analyst sees any meaningful unit growth leading to higher price gains, due in part to the outsized short-interest in the stock. According to data from Benzinga Pro, 41.86% of Carvana shares are being sold short. 

Erickson also noted Carvana's cash generation may be better than investors realize, and the company may be able to favorably refinance debt as the company's liquidity improves. 

Carvana stock has gained nearly 70% over the past month, and shares are trading well-above the stock’s 50-day moving average of $53.71, according to data from Benzinga Pro

Related News: Broadcom Q1 Results: Earnings Beat, Revenue Beat, Guides Below Estimates

Is CVNA A Good Stock To Buy?

An investor can make a few decisions when deciding whether a stock is a good buy. In addition to valuation metrics and price action which you can find on Benzinga's quote pages – like Carvana‘s page for example – there are factors like whether or not a company pays a dividend or buys a large portion of its stock each quarter.

These are known as capital allocation programs. Carvana does not pay a dividend, but obviously has a few ways it can return value to shareholders. Feel free to search Benzinga's dividend calendar for the next company that is due to pay a dividend and determine what kind of yield you can earn for holding a share of the company.

For example, if you're looking to earn an annualized return of 15.87%, you'll need to buy a share of Ellington Residential by the Mar. 27, 2024. Once done, you can expect to receive a nominal payout of $0.08 on Apr. 25, 2024.

Buyback programs are obviously different and highly variable. A company can approve a buyback program and purchase shares as it sees fit over the course of time in which the buyback was authorized. Looking through the latest news on Carvana will often yield whether or not the company has approved a buyback program recently. Buyback programs usually serve as a support for share prices, serving as a backstop for demand.

CVNA Price Action: According to Benzinga Pro, Carvana shares are up 12.8% at $89.61 at the time of publication.

Image from Shutterstock

Market News and Data brought to you by Benzinga APIs
Posted In: Analyst ColorNewsMoverswhy it's moving
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!