Carvana pullback presents ‘opportunistic entry point,’ says Morgan Stanley

Investor concerns around auto credit based on the Tricolor and First Brands bankruptcies, Carmax’s (KMX) markedly higher provisions for loan losses and weaker consumer confidence and economic data are “not unfounded,” but Morgan Stanley argues that “fears may be overblown” given that rising delinquencies have been a gradual trend since 2022, affording auto issuers like Carvana (CVNA) time and flexibility to adjust parameters to maintain performance. The firm views the pullback in Carvana shares as “an opportunistic entry point for a best-in-class business” and reiterates an Overweight rating and $450 price target.