Carvana (CVNA) shares rose on Friday as Morgan Stanley analyst Adam Jonas upgraded the online used-car retailer and nearly doubled his price target on the stock, to a Wall Street high of $420 from $225.
Jonas upgraded the stock to overweight from equal weight. Jonas acted after Carvana posted revenue of $1.83 billion for the fourth quarter. That's up 65% from $1.1 billion in the year-earlier quarter and above the consensus analyst forecast of $1.6 billion.
The company's net loss widened to 87 cents a share from 82 cents in the year-earlier quarter. Shares outstanding rose 46% to 73.2 million.
Carvana has benefited from strong demand for autos and for contactless purchasing during the COVID pandemic.
The stock recently traded at $293.63, up 11%. It has nearly tripled over the past year.
To be sure, earlier this month TheStreet.com Founder Jim Cramer warned about speculative froth in hot stocks like Carvana.
Jonas said in a commentary cited by Barron’s that Carvana "is uniquely positioned to serve an automotive and transportation [addressable market] that goes far beyond the used-car market, driving potentially far higher growth that is not reflected in today’s share price.”
“In our opinion, describing Carvana as just a ‘used car dealer’ is like describing Amazon (AMZN) nearly two decades ago as just an online bookseller.”
Jonas also sees potential for Carvana to shine in related automotive and fleet-management segments.
“While it may take several years before Carvana enters such markets at scale, … we don’t believe it’s too soon for investors to consider the outcomes today,” he said.
In December, Jefferies initiated coverage of Carvana with a buy rating and a price target of $300.