Morgan Stanley analyst Andrew Percoco named Carvana (CVNA) a "Top Pick" after the used-car retailer reported record revenue for its fiscal Q3 on Thursday. CVNA's quarterly revenue soared 42% on a year-over-year basis to $8.04 billion, helping adjusted core profit also hit an all-time high of $800 million in the third quarter.
Despite the post-earnings surge, however, Carvana stock remains down about 15% versus the start of this year.
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How High Can Carvana Stock Fly?
Morgan Stanley maintained its "Overweight" rating on CVNA shares, with a bullish $88 price target indicating potential upside of about 30% from current levels. Percoco is fully convinced that the company's business model can not only sustain but also compound profits through macroeconomic volatility.
Carvana's earnings per share (EPS) came in at $0.39, below the consensus estimate of $0.44, but Morgan Stanley downplayed the miss as much of it was due to a one-time debt-related charge.
Note that the post-earnings rally helped CVNA rip through its major moving averages (MAs) on Oct. 29, indicating bulls have taken back control across multiple timeframes.
CVNA Shares Are Attractively Priced
Percoco's bullish call is premised also on management's encouraging guidance for sequential unit growth in Q4, helping full-year adjusted core profit print near the high end of its guided range ($2.7 to $3.0 billion).
At the time of writing, Carvana shares are trading at a price-to-sales (P/S) multiple of roughly 3x, which the analyst called a discount to their historical averages in his research report.
All in all, the investment case hinges on the company's ability to translate rising sales volumes into sustained cash flow. Higher unit sales could spread fixed costs across more transactions, supporting profitability as the business expands.
CVNA nonetheless remains unappealing for income-focused investors as it doesn't currently pay a dividend.
How Wall Street Recommends Playing Carvana
Crucially, other Wall Street firms are just as bullish on Carvana as Morgan Stanley heading into 2027.
According to Barchart, the consensus rating on CVNA stock sits at "Moderate Buy," with the $82 price target indicating potential upside of more than 20% from here.
On the date of publication, Wajeeh Khan did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
