Morgan Stanley Upgrades Carvana As It Targets New Markets, Nearly Doubles Price Target

Carvana Co CVNA seems “uniquely positioned” to cater to a total addressable market far beyond the used car market, according to Morgan Stanley.

The Carvana Analyst: Adam Jonas upgraded Carvana from Equal Weight to Overweight and raised the price target from $225 to $420.

The Carvana Thesis: The company’s significantly higher growth potential is not reflected in its share price, Jonas said in the Friday upgrade note.

Describing Carvana as a “used car dealer” is like describing Amazon.com, Inc. AMZN as an “online book seller,” the analyst said. 

The company’s range of capabilities that make it successful in the used car business have “adjacent applications to a host of other automotive and fleet management related end markets,” he said. “While it may take several years before CVNA enters such markets at scale we don't believe it's too soon for investors to consider the outcomes today.”

Jonas named three drivers behind the price target increase:

• Expectations of higher market share and margins in the core used car business
• Inclusion of the new car market opportunity
• Inclusion of a mega-fleet management opportunity

CVNA Price Action: Shares of Carvana were up 9.56% at $288.87 at last check Friday.