BofA Securities analyst Michael McGovern reinstated coverage on Carvana Co. (NYSE: CVNA) with a Buy rating and a price target of $185.
The analyst believes the company is well-positioned for sustained long-term growth in the $800 billion+ fragmented market.
McGovern expects Carvana to sustain recent improvements in unit economics and leverage as growth accelerates.
As prices normalize, car supply returns, and interest rates begin to fall, the market is recovering, adds the analyst.
Used car sales remain around 20% below pre-COVID levels, and the analyst anticipates further recovery as rates decrease.
The analyst anticipates Carvana's 2025 revenue of $15.45 billion and EBITDA of $1.50 billion, slightly above Street estimates of $15.31 billion and $1.46 billion, respectively.
The analyst assumes a 20% gross margin and SG&A expenses at 14% of revenue for the year.
For 2026, McGovern expects 20% revenue growth driven by high-teens retail unit growth.
The analyst notes near-term profit estimates are achievable without significant new capacity investments as unit growth accelerates and less reconditioning site expansion is needed.
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Price Action: CVNA shares are up 1.09% at $154.56 at the last check Tuesday.