Morgan Stanley analyst updates Carvana stock ahead of earnings

Carvana investors had their confidence shaken last quarter after the online auto retailer missed analyst fourth-quarter expectations.

But the stock has recovered nicely over the past month, climbing nearly 40% and putting shares back 1% higher than they were when the year started.

While investors seem confident heading into the release of first-quarter earnings results on Wednesday, April 28, analysts at Morgan Stanley urge them to "be opportunistic on near-term volatility and pay attention to the new car dealership strategy," according to a note emailed to TheStreet.

Earlier this year, Carvana acquired its seventh Stellantis dealership, expanding its U.S. footprint, including in markets like Massachusetts, California, Arizona, Texas, and Georgia. The move allows the traditional used car retailer to now also sell new cars

The firm sees Carvana investors as generally bullish long-term, while being tactically cautious heading into the Q1 print after being bitten in Q4 last year.

However, despite greater exposure, the longer the Iran War continues, the more likely large oil-price shocks are to lower durable goods spending, according to Morgan Stanley. The firm is still bullish, reiterating an overweight rating and a $450 price target, with a $745 bull case.

Photo by Ivan Kazlouskij on Unsplash

Morgan Stanley warns investors to be tactical on Carvana

Carvana shares closed Tuesday's session down, basically even at $406.42.

Investors who had grown "accustomed to blowout beats + raises on earnings" are now being "tactically cautious into the print." Once bitten, twice shy. And Morgan Stanley analyst Daniela Haigian identified three major reasons for the caution in a note emailed to TheStreet.

• Exposure to the consumer (inflation rates, labor cuts, market concerns)
• Operating disruptions (weather, rising fuel costs, and volatility in retail GPU
• Questions that subprime loan spreads could weaken from here due to consumer health

Related: Bank of America revamps Carvana stock for the rest of 2026

But the firm reminded investors in its note that "we've seen CVNA deliver stable gain on sale through volatile macro periods."

"We remain convinced in CVNA's ability to execute against what is likely a transitory retail GPU headwind and maintain its growth trajectory, which, when combined with an abatement in consumer fears, can catalyze a path towards recovered momentum in the stock," wrote Haigian.

The firm expects Carvana to report selling more than 185k retail units in the quarter, representing as much as 40% year-over-year growth, but it still sees potential headwinds from a prolonged conflict in the Middle East.

"Though Carvana's growth is somewhat independent of the auto cycle, and we believe Used car sales benefit relative to New car sales in a rising fuel cost environment, Carvana's exposure to the lower-end consumer and lack of uplift from Parts & Service demand, along with its premium valuation, are more likely to result in multiple compression in the event of a prolonged conflict," Haigian said.

The firm doesn't expect any guidance this quarter, "based on the stock reaction to the 3Q25 guidance and the magnitude of macro uncertainty we've seen YTD."

Carvana stands above rivals like CarMax

Morgan Stanley's note emphasizes that there are certainly multiple headwinds in the car retail space, but Carvana is more equipped to handle them than its peers.

Subprime consumer health is a big concern as the economy sputters, the war rages on and Subprime AAA spreads (the significantly higher interest rates and fees charged to borrowers with low credit scores) are getting tighter.

Still, there are also signs of auto consumer health as well, and Morgan Stanley analysts expect consumer credit performance to improve as "unemployment remains low and inflationary pressures subside in the back half of this year. We have already seen subprime auto delinquencies follow their expected path so far this year, falling to 5.54% in March from January's all-time high of 6.37%."

But a prolonged period of oil stress could reverse that trend and offset gains from higher tax returns for lower- and middle-income earners.

Related: Carvana CEO shares blunt truth about EVs

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This story was originally published April 29, 2026 at 4:37 PM.