Al Root

Carvana stock rose early Tuesday after catching an upgrade from Morgan Stanley. The broker believes the recent pullback offers a good entry point in shares of the used-car dealer.

Shares were up 3.7% at $221.60 apiece, while S&P 500 and Dow Jones Industrial Average futures were flat.

Analyst Adam Jonas upgraded Carvana stock to Buy from Hold, and lifted his price target to $280 from $260.

His target is higher, but the main reason for the change appears to be the market. The recent stock pullback is "a unique opportunity for investors to gain exposure to a leader in auto retail and fleet fulfillment," wrote Jonas.

Carvana stock was north of $285 in mid-February, but shares dropped 12.1% after the company reported fourth-quarter earnings on Feb. 19. Although the numbers were better than expected, Carava's rally seemed to run out of steam. Coming into the earnings report, Carvana stock had gained roughly 450% over the prior 12 months.

Jonas transformed his view during the rally. In early November, he upgraded Carvana stock to Hold from Sell, and lifted his target price to $260 from $110.

The ratings progression mirrors the company's transformation. Carvana lost money in 2022. In 2023, it produced earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $339 million. In 2024, Ebitda was $1.4 billion, and for 2025 Wall Street expects $1.9 billion, according to FactSet.

That leaves Carvana trading for about 27 times estimated 2025 Ebitda. Industrial stocks typically trade for closer to 17 times Ebitda, according to FactSet. Carvana is more expensive, but its Ebitda is still growing rapidly.

With the upgrade, 55% of analysts covering Carvana stock have Buy ratings. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Carvana stock is about $279.

Write to Al Root at allen.root@dowjones.com

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March 25, 2025 07:35 ET (11:35 GMT)

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