Carvana Co. (NYSE:CVNA) shares added more than 7% after the used car sales platform was upgraded to an ‘Outperform’ rating by Wedbush analysts.
The analysts also raised their 12-month price target to $400 from $380, arguing that the recent pullback in the stock presents a buying opportunity.
Carvana shares had fallen roughly 13% over the past month, trailing the S&P 500 amid concerns about the broader credit environment and softer near-term performance from its closest peer CarMax.
Wedbush sees the selloff as excessive and believes “investors should take advantage of this period of relative weakness.”
They noted that Carvana now trades at about 22 times its 2027 earnings estimate, near the low end of its historical valuation range over the last two years. “We think the risk/reward is compelling, with our valuation and analysis implying limited downside from here,” the analysts wrote.
Wedbush highlighted strengthening competitive momentum as a key factor behind the upgrade.
The firm said current industry estimates indicate that Carvana is on track to surpass CarMax in quarterly used-unit volume in the fourth quarter of 2026, around six months earlier than previously expected.
“Street estimates call for Carvana to deliver approximately 187,000 used units in 4Q 2026, outpacing approximately 170,000 for CarMax,” the analysts wrote.
They also pointed to the operational and technology improvements Carvana has implemented over recent quarters, which they believe are enabling the company to grow faster than the broader used-car market.
Wedbush’s base-case forecast now assumes Carvana will reach 3 million annual retail unit sales by 2033, representing a compound annual growth rate of about 23%.
Margin performance remains a central part of Wedbush’s thesis. The analysts said they expect Carvana to continue delivering year-over-year margin expansion through disciplined cost management and sustained gains in gross profit per unit.
While credit concerns have weighed on the sector, Wedbush said Carvana’s credit performance remains relatively healthy even as the company expands further into lower-tier financing.
They noted that broader investor unease as more a reflection of market sentiment than company-specific deterioration, writing that they see “little cause for concern.”
Along with upgrading the stock and boosting its price target, Wedbush raised its forecasts for both the fourth quarter and the full year.
The firm now expects fourth-quarter revenue of $5.2 billion, an increase of 46.4% from a year earlier and roughly 3% above its prior projection. Its used-unit growth estimate for the period rose to 36.3% year-over-year.
The analysts also revised their adjusted EBITDA estimate for the quarter to $535 million, representing a 10.3% margin.
For the full year, Wedbush now anticipates revenue of $19.9 billion, up 45.6% from last year, supported by used-unit sales growth of 41.4%. Its model implies adjusted EBITDA of $2.3 billion at an 11.4% margin.