Analysts remain bullish on Carvana as Amazon eyes used-car sales
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EYEING USED-CAR SALES: Amazon is eyeing the sale of used cars as the company continues to refine its new car-shopping platform with customers and dealers in certain U.S. markets, Carly Schaffner of Automotive News reports. Publicly traded companies in the used car sales space include CarMax (KMX), AutoNation (AN), Vroom (VRM), Carvana, and Sonic Automotive (SAH).
NOT NEW NEWS: JPMorgan notes that in an AutoNews podcast earlier this week and as covered by a related article yesterday, Amazon Autos expressed its intentions to broaden the scope of its nascent online vehicle sales initiative to include used vehicle sales. The firm had previously learned of Amazon's intentions to expand into used car listings during its meetings with their sales and business development teams at CES 2025 and NADA Expo.
JPMorgan views Amazon's platform listings and transaction capabilities as essentially providing an alternative lead generation channel for new and used car dealers, and sees minimal risk of disintermediation of the dealer channel — AutoNation, Asbury Automotive (ABG), Group 1 Automotive (GPI), Lithia Motors (LAD), Penske Automotive (PAG), Sonic Automotive, CarMax, Carvana — given the complexities involved in franchise regulations and used car sourcing/reconditioning as well as the criticality of a robust service network. The firm also sees minimal risk to franchise dealer Finance & Insurance given it remains a significant profit driver for the stores and dealers are unlikely to list their inventory if F&I commissions are not guaranteed/compensated.
NOT DIRECTLY COMPETITIVE: BofA notes that Amazon Autos general manager Fan Jin appeared on the Automotive News Daily Drive podcast this week, providing details on Amazon's push into the automotive sector and stating that Amazon is 'getting into used cars soon here in a little bit.' Amazon Autos does not provide delivery or recondition used vehicles itself like Carvana and has shown no intention to do so, notes the firm, which also points out that its dealer partners see lower attached rates for warranties and service contracts.
Amazon's internal surveys reportedly show customers increasingly willing to buy cars online and BofA thinks normalizing these types of online purchases can benefit the whole online auto sector, including Carvana, adding that it sees 'multiple reasons' why this move is not directly competitive with Carvana. The firm, which argues that Amazon's model is more competitive to third-party listing sites like TrueCar (TRUE) and CarGurus (CARG), maintains a Buy rating and $220 price target on Carvana shares.
OF NOTE: This morning, Piper Sandler upgraded Carvana to Overweight from Neutral with an unchanged price target of $225. Most used car transactions don't span international borders, and demand is relatively stable, regardless of the macro environment, the firm tells investors in a research note. Further, Piper believes 'staid business models and extreme fragmentation have left the door open to disruptors.' Given this, the firm upgraded both Carvana to Overweight following the recent share pullback. Since market share is starting from a low base, Piper expects multi-year revenue growth of over 20% annually, with even faster earnings growth. The firm thinks the stock can grow despite macro unease and/or higher tariffs.
PRICE ACTION: In morning trading, shares of Amazon have gained about 1.5% to $198.49, while Carvana has jumped about 10% to $193.66.
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Amazon Auto move not directly competitive with Carvana, says BofA
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