Bank of America hikes Carvana price target following S&P 500 inclusion announcement
Bank of America thinks Carvana can continue its strong year-to-date rally as it gets added to the S & P 500. The bank reiterated its buy rating on the used car retailer and hiked its price objective to $455 from $385, which signals upside of 13.8% from Friday’s close. Analyst Michael McGovern pointed to the S & P Dow Jones Indices’ announcement that Carvana will be officially added to the S & P 500 index, effective prior to market open on Dec. 22. Inclusion into the S & P 500 can give a stock a boost as it forces index funds and ETFs to buy shares of the newly added company. CVNA YTD mountain CVNA YTD chart “We identified S & P inclusion as our top potential catalyst for CVNA back in June, as CVNA had already met the profit requirements for several quarters. We think Street had grown slightly skeptical on likelihood of inclusion, with voting rights being viewed as a possible hurdle,” he wrote. Carvana’s fundamentals remain strong, he added. McGovern attributed the stock’s recent run-up to positive data on unit volumes after management’s fourth-quarter guidance raised concerns about a potential slowdown. “We see consumer demand as stable/strong, leading to little deceleration, in part driven by share gains vs. CarMax, as management returns ‘fundamental gains’ to customers via lower pricing and lower APRs,” he said. “We expect Carvana to surpass CarMax in quarterly units sold at some point in 2026.” McGovern also said his new price target assumes that Carvana’s management can maintain a compound annual unit growth rate of 20% from 2027 to 2032, versus prior estimates of 18.5%. Meanwhile, the company is seeing tailwinds in its capital structure. It could also potentially encounter lower costs of capital going forward, with recent credit rating upgrades and this S & P inclusion in mind. Shares of Carvana have surged 97% this year.
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