Carvana: Bank trims target to $425 but keeps 'outperform' on long term margin case

Wedbush Securities maintained its 'outperform' standing connected Carvana Co. (NYSE:CVNA) but chopped its 12-month terms people to $425 from $500 pursuing below-par 4th fourth results, which prompted a 9% autumn successful the shares aft hours.

Fourth-quarter gross of $5.6 cardinal from the car retailer rose 58% twelvemonth connected twelvemonth and came successful astir 7% up of statement expectations.

Retail utilized units totalled 163,522, up 43.0% twelvemonth connected twelvemonth and 4.2% up of consensus, portion mean selling prices accrued 13.9% twelvemonth connected twelvemonth to $25,415.5.

However, gross nett per portion of $6,562 fell abbreviated of the $6,823 statement estimation and declined 5.1% twelvemonth connected year.

Adjusted net earlier interest, tax, depreciation and amortisation of $511 cardinal represented a 9.1% borderline and marked the highest quarterly fig reported to date, but missed statement by astir $27 million.

Wedbush attributed the borderline compression chiefly to accrued reconditioning expenses, peculiarly astatine locations with the lowest absorption tenure.

Management indicated that gross nett per portion should normalise implicit coming quarters, and Wedbush noted that reconditioning costs per portion would person been $220 little successful the 4th fourth if each locations had operated successful enactment with the apical quartile.

For the archetypal 4th of 2026, the institution guided to sequential maturation successful some units sold and adjusted net earlier interest, tax, depreciation and amortisation, broadly successful enactment with consensus.

Wedbush present forecast archetypal 4th gross of $5.9 billion, up 38.7% twelvemonth connected twelvemonth and astir 6% supra its anterior estimate, with adjusted net earlier interest, tax, depreciation and amortisation of $657 cardinal and an 11.2% margin, astir 30 ground points beneath its earlier assumption.

For the afloat twelvemonth 2026, Wedbush raised its gross forecast to $26.9 billion, implying 32.5% growth, and modelled adjusted net earlier interest, tax, depreciation and amortisation of $3.0 cardinal astatine an 11.2% margin, down from 11.6% previously.

The semipermanent program remained to scope 3 cardinal yearly retail units and a 13.5% adjusted net earlier interest, tax, depreciation and amortisation borderline wrong 5 to 10 years.

In 2025, the institution delivered 597,000 retail units, up 43.3% twelvemonth connected year, demonstrating continued stock gains successful the utilized car market.

Wedbush valued Carvana utilizing a discounted currency travel methodology, applying a 10.5% weighted mean outgo of superior and a 3.5% terminal maturation complaint to deduce its $425 equity worth per share.

A discounted currency travel exemplary estimates the contiguous worth of forecast aboriginal currency flows, portion the weighted mean outgo of superior reflects the blended outgo of indebtedness and equity funding.

Although near-term margins were nether pressure, Wedbush said its longer-term thesis connected operating leverage, portion maturation and competitory positioning remained intact and described the stock terms absorption arsenic overdone.