Benzinga | May 3, 2021 01:12PM EDT

Consumer Demand Fuels Carvana Upgrade

Carvana Co.'s (NYSE:CVNA) inventory has recovered to more than 32,000 units in 2021 and appears well-positioned to meet rising consumer demand, according to BofA Securities.

The Carvana Analyst: Nat Schindler upgraded the rating for Carvana from Neutral to Buy, while raising the price target from $285 to $350.

The Carvana Thesis: BofA's research team has raised the auto sales forecasts for the U.S. while reducing the North American production forecasts, Schindler said in the upgrade note.

While demand remained resilient in the U.S. and North America in the first few months of 2021, production is challenged by semiconductor shortages and other supply chain disruptions, he added.

"The resulting tighter supply supports used car sales and shifts competitive emphasis in 2021 to inventory levels," the analyst wrote.

While stating that used vehicle demand and pricing have risen over the past five quarters, Schindler added, "We think continued momentum in U.S. demand into 2H2021 will drive healthy sales growth for companies with well-stocked inventories."

"Based on recent inventory data for Carvana, Vroom and Carmax as well as industry data on U.S. sales and pricing, we think there is likely upside to consensus units and GPU growth in 1H21 that could persist through 2021," he said further.

CVNA Price Action: Shares of Carvana had risen by 3.41% to $294.99 at the time of publication Monday.

(Photo: Carvana)