On Friday, Baird adjusted its financial outlook for Carvana Co. (NYSE:CVNA), the online used car retailer, by raising the price target to $60.00 from the previous $35.00. The firm has maintained a Neutral rating on the stock. This adjustment follows Carvana's announcement that it anticipates quarterly adjusted EBITDA to exceed $100 million, which suggests an annual run-rate around $500 million.
The company's after-hours share trading showed a significant uptick as a result of the positive guidance. Carvana's management is also transitioning to the third phase of its turnaround plan, which focuses on unit growth. This shift indicates a strategic move from the previous stages that centered on stabilization and cost control.
Baird's commentary on the updated price target highlighted Carvana's improved operational stance compared to one or two years prior. The company has achieved substantial annual expense reductions, exceeding $1 billion. Additionally, Carvana has implemented process improvements throughout its organization, which have contributed to its current operational health.
Despite the operational progress, Baird noted the company's upcoming debt service obligations as a potential challenge. As Carvana's management pivots towards unit growth, this approach will serve as a new test for the platform's durability and ability to sustain its positive momentum.
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