Carvana Co. (NYSE:CVNA) shares added more than 5% on Thursday after it received positive reports from two brokers.
Bank of America analysts believe that Amazon Autos’ expansion could boost sales for other online auto retailers.
The analysts suggested that Carvana is unlikely to face significant pressures from Amazon's entry into the auto market, which aligns more closely with third-party listing sites like TrueCar and CarGurus than with Carvana’s model.
Amazon Autos currently operates on a third-party model, where customers browse, order, finance, and schedule vehicle pickups through dealership partners.
Unlike Carvana, Amazon does not handle vehicle delivery or reconditioning, which are key parts of Carvana’s vertically integrated model, Bank of America highlighted. It also has a limited selection.
Normalize online vehicle sales
The analysts believe that Amazon Autos could actually benefit Carvana and other online auto retailers in the long term by helping to normalize online vehicle sales.
“Auto purchases have just 1% online penetration, underscoring a hesitancy to make big purchases online,” analysts wrote.
“Amazon's internal surveys reportedly show customers increasingly willing to buy cars online, and we think normalizing these types of online purchases can benefit the whole online auto sector, including Carvana.”
Bank of America repeated its ‘Buy’ rating on Carvana and awarded it a $220 price objective.
Meanwhile, analysts at Piper Sandler upgraded Carvana’s rating to ‘Overweight’ from ‘Neutral’ while maintaining their price target of $225.
Carvana shares traded up 5.2% at about $185 on Thursday afternoon.