Yahoo Finance Carvana Co. Analysts Are Pretty Bullish On The Stock After Recent Results
It's been a mediocre week for Carvana Co. (NYSE:CVNA) shareholders, with the stock dropping 19% to US$88.77 in the week since its latest full-year results. The results look positive overall; while revenues of US$3.9b were in line with analyst predictions, statutory losses were 5.3% smaller than expected, with Carvana losing US$2.45 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Carvana after the latest results.
Check out our latest analysis for Carvana
Taking into account the latest results, the current consensus from Carvana's 18 analysts is for revenues of US$5.86b in 2020, which would reflect a major 49% increase on its sales over the past 12 months. Per-share statutory losses are expected to explode, reaching US$1.85 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$6.09b and losses of US$1.38 per share in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
The average analyst price target lifted 8.5% to US$92.19, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Carvana, with the most bullish analyst valuing it at US$125 and the most bearish at US$27.00 per share. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to analysts, with revenue forecast to grow 49%, in line with its 57% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 5.7% next year. So it's pretty clear that Carvana is forecast to grow substantially faster than its market.
The Bottom Line
The most important thing to take away is that analysts reduced their loss per share estimates for next year, perhaps highlighting increased optimism around Carvana's prospects. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Carvana going out to 2024, and you can see them free on our platform here..
You can also see whether Carvana is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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