Bank of America Securities (BofA) struck a constructive tone on Carvana Co. (NYSE:CVNA), highlighting improving fundamentals and growing confidence in the company's operational trajectory.

BofA Securities analyst Michael McGovern maintained a Buy rating on Carvana with a $400 price forecast, implying about 33.5% upside.

Operational Momentum And Market Share Gains

Following a virtual investor meeting, McGovern highlighted improving fundamentals, particularly in gross profit per unit (GPU) and cost leverage. GPU is rebounding after fourth-quarter reconditioning disruptions tied to new general managers, with operational and technology improvements supporting recovery. Seasonal tailwinds, including lower depreciation, are also expected to aid margins.

Carvana continues to gain market share and is positioned to become the largest independent used-car dealer in the U.S. by volume. Its vertically integrated model enhances economics, especially in financing, while maintaining competitive pricing without traditional dealer fees.

The analyst also noted that Carvana's competitive positioning remains strong relative to CarMax Inc (NYSE:KMX), driven by its vertically integrated model and ability to capture more value across the customer lifecycle, particularly in financing.

Investment And Financing Trends

The company is investing in faster fulfillment, including same- and next-day delivery, which may pressure near-term expenses but support long-term efficiency. Planned Adesa integrations and facility builds could drive higher capital spending.

On financing, Carvana's recent Prime ABS deal performed as expected, with stable credit trends in non-prime segments supported by tighter underwriting and improved recoveries.

Valuation And Risks

McGovern's valuation assumes 20% revenue CAGR through 2032, 20% gross margins, and SG&A at 6% of revenue, implying a 2027 EV/EBITDA multiple of 29x, above peers due to stronger growth expectations.

Key risks include capital intensity, debt-related liquidity concerns, macroeconomic sensitivity in used-car demand, and potential tariff impacts on supply.

"We see substantial share gains ahead for CVNA, driven by its first-mover advantage, production ramp, and secular shift of car buying online, likely to soon make CVNA the largest independent used-car dealer in the U.S. by volume," the analyst said in the report.

CVNA Price Action: Carvana shares were down 0.13% at $299.20 at the time of publication on Tuesday, according to Benzinga Pro data.

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