Carvana (CVNA) Stock Forecast & Price Target

Carvana Co has demonstrated a strong capacity to expand its market share in the U.S. used-vehicle market through its innovative digital platform, which allows for efficient customer acquisition, financing, and fulfillment. The company's vertically integrated model has led to industry-leading gross profit metrics and consistent profitable growth, supported by strategic advancements such as the launch of Car Inspect, which enhances operational efficiency. Furthermore, improvements in transportation costs and increased vehicle hauler loads enable Carvana to acquire and deliver more vehicles with minimal additional costs, further solidifying its positive financial trajectory.

Carvana has experienced a decline in the ratio of direct consumer buys to auction unit sourcing, falling from approximately 80% to 70%/75%, which could impact the efficiency and profitability of its retail operations. The decline in retail gross profit per unit (GPU) from $3,497 to $3,226, along with concerns over poor credit decisions and deteriorating receivables performance, indicates potential challenges in securing future funding and maintaining sales profitability. Additionally, macroeconomic concerns surrounding subprime auto delinquencies are creating stress in the asset-backed securities market, further limiting Carvana’s ability to retail used vehicles and highlighting risks associated with its leveraged balance sheet.