RBC Capital Markets upgraded Carvana Co (NYSE:CVNA) to Outperform from Sector Perform on Tuesday, citing sustainable momentum in unit sales and profits after the online used-car retailer’s “remarkable turnaround” last year.

Shares climbed 6.5% in early trading to $201.27, building on Monday’s gains after the company announced it had amended an agreement to reestablish a $4 billion commitment for automotive finance receivables.

The Carvana Analyst: Analyst Brad Erickson upgraded the rating for Carvana from Sector Perform to Outperform, while raising the price target from $270 to $280.

The Carvana Thesis: The current Street estimates do not reflect the company's market share ramp, Erickson said in the upgrade note.

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"We raise our estimates ~4% ahead of Street for Q4 and ~2% for 2025, and could still wind up overly-conservative," he added.

There is room for further growth in GPU levels as "inventory pools expand to drive delivery/logistics efficiencies," the analyst stated.

"We believe retail marketplace can become a more meaningful contributor to unit growth over time as the company expands its commercial fleet partnerships," Erickson wrote. He further stated that the perception of Carvana having a weak balance sheet could abate over time "through a combination of paying down debt and re-financing."

CVNA Price Action: Shares of Carvana had risen by 7.28% to $202.59 at the time of publication on Tuesday.

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