Investing.com -- Deutsche Bank resumed coverage of Carvana with a Buy rating and a $395 price target, saying the online used car retailer is positioned to extend its lead as it leans further into a fully integrated operating model.
The brokerage said Carvana's control of its logistics, reconditioning and technology stack gives it an advantage in product reliability, ease of use, supply depth, delivery speed and pricing.
It added that a large portion of Carvana's infrastructure is already built and running below capacity, creating room for the company to increase volumes without matching cost growth.
Analysts said that combination puts Carvana in a favourable position to reinvest in its platform while still delivering margin gains.
They expect retail unit growth to come in ahead of market expectations and drive upside to adjusted EBITDA. While Deutsche Bank models only limited margin expansion in the near term as Carvana continues to reinvest, it said the balance of risks to margin forecasts is tilted higher.
The firm said it sees the company's scale advantages widening over the coming years as it adds volume through its existing network.
"We are resuming coverage of Carvana with a Buy rating. To us, Carvana, like Amazon before it is a classic market-leading 1P e-commerce player that is in the early innings of doubling down on the advantages afforded to it via a fully verticalized infrastructure," analyst Lee Horowitz of DB said.