Shares are Carvana (CVNA) are in focus on Wednesday after an analyst at JPMorgan downgraded the stock to Neutral, citing a less favorable risk/reward. Meanwhile, an analyst at Jefferies raised his price target on the shares to $400, saying he sees downside to consensus unit sales estimates in the second quarter but upside to prices.

LESS FAVORABLE RISK/REWARD: JPMorgan analyst Rajat Gupta downgraded Carvana to Neutral from Overweight with an unchanged price target of $325. The recent rebound in the shares coupled with a "meaningful pull back" in brick and mortar auto retailers makes the stock's near-term relative risk/reward less favorable, Gupta told investors in a research note. While Gupta continues to like Carvana’s disruptive business model and related long-term growth potential, the setup near-term is less favorable.

With the shares outperforming peers and up 31% year-to-date, Carvana is getting "appropriate credit for robust multi-year revenue and gross profit growth," the analyst contended. On GPU, the analyst said Carvana has already proven its potential and meaningful upside from here is unlikely in the near- to medium-term particularly as finance GPU nears peak and retail GPU already reflects material sourcing improvement benefits. The analyst further stated that Carvana's price competitiveness is diminishing vs. pre-pandemic levels.

Beyond the medium-term, Gupta continues to see attractive opportunities at Carvana, including the move into 3-P listing more aggressively, the likelihood of expanding into regions outside of the U.S., and possibly leveraging its logistics network across the vehicle retail ecosystem.

Q2 UPSIDE: Meanwhile, Jefferies analyst John Colantuoni raised the firm's price target on Carvana to $400 from $375 and kept a Buy rating on the shares. His website scrape analysis for Carvana and peer Vroom (VRM) points to 1% downside to consensus unit sales estimates and 15% or more upside to vehicle pricing in Q2, which he expects will flow through to higher gross profit per unit, Colantuoni told investors in a research note of his own. Based on the scrape of Carvana's site, the analyst sees 16% upside to Q2 consensus. The analyst notes that traffic to Carvana's site grew 106% in May, or 134% growth in the first two months of Q2, and an acceleration from 108% in Q1. Growth is likely to moderate some as June faces tougher comparisons, but Colantuoni still thinks this points to upside to Q2 consensus units.

PRICE ACTION: In morning trading, Carvana shares are fractionally lower at $311.35.