Yahoo Finance News Flash: Analysts Just Made An Upgrade To Their Carvana Co. (NYSE:CVNA) Forecasts
Shareholders in Carvana Co. (NYSE:CVNA) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.
Following the upgrade, the latest consensus from Carvana's 21 analysts is for revenues of US$9.7b in 2021, which would reflect a substantial 45% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 29% to US$1.45. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$8.9b and losses of US$1.88 per share in 2021. So it seems there's been a definite increase in optimism about Carvana's future following the latest consensus numbers, with a very favorable reduction to the loss per share forecasts in particular.
See our latest analysis for Carvana
There was no major change to the consensus price target of US$309, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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$420 and the most bearish at US$80.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
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. It's clear from the latest estimates that Carvana's rate of growth is expected to accelerate meaningfully, with the forecast 64% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 52% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Carvana is expected to grow much faster than its industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Carvana's prospects. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Carvana could be a good candidate for more research.
Analysts are definitely bullish on Carvana, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including a short cash runway. For more information, you can click through to our platform to learn more about this and the 1 other risk we've identified .
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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