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Carvana Co (NYSE: CVNA) has tripled since the start of 2024 but a Needham analyst is convinced it’s not out of room to run just yet. 

Chris Pierce upgraded shares of the used car retailer this morning to “buy”. 

Carvana stock traded at a high of $361 during the pandemic in 2021. 

Carvana stock has another 28% upside

The Needham analyst now sees upside in CVNA to $160 that signals potential for another 28% gain from here. 

Pierce expects the digital-first experience to help the New York listed firm to gain share moving forward. His research note reads:

We see CVNA becoming a profitable secular growth story, with increasing retail unit sales and improving gross profit per unit metrics from leveraging a high-fixed-cost base.

Carvana stock does not currently pay a dividend, though. 

Why else is he bullish on CVNA?

Chris Pierce expects a stabilised balance sheet to remain a tailwind for CVNA. 

He recommends investing in the $25 billion company based out of Tempe, Arizona as its pivot to unit growth will likely translate to a share price increase in the coming months. 

The Needham analyst is positive on the Adesa U.S. that CVNA bought from KAR for $2.2 billion in cash in 2022. 

We see a long runway for growth and efficiency gains, with only 2 Adesa facilities using [Carvana’s] Carli software currently.

Optimisations at the IRCs will deliver a boost to Carvana stock as well, he added. Shares of the used car retailer traded at a low of about $4.0 only in late 2022. 

Carvana had a strong fiscal Q1

Retail unit estimates have troughed and are likely to recover moving forward, Needham analyst Chris Pierce told clients in a research note on Wednesday. 

All in all, he’s constructive on Carvana stock as it offers a more convenient and streamlined buying experience compared to the traditional car retailers. 

Pierce expects CVNA to benefit as the “business and interest rate environment improve”. The New York listed firm has bought back about 5.0% of its outstanding debt. 

In early May, Carvana Co reported its financial results for the first quarter that handily topped Street estimates. CEO Ernie Garcia III said at the time:

We delivered our best results in company history, validating our long-held belief that Carvana’s online retail model can drive industry-leading profitability while delivering industry-leading customer experiences.

Carvana also forecast a sequential increase in retail units and EBITDA growth rate for the second quarter in May. 

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