Carvana's stock has fallen 94% over the past 12 months, so today's positive sentiment from an analyst was a welcome change for shareholders. Shares were up 12.2% as of 3:31 p.m. ET.
J.P. Morgan analyst Rajat Gupta upgraded the stock to a neutral rating from the previous underweight rating and reiterated his price target of $20.
While some investors have grown concerned about Carvana's potential for bankruptcy, Gupta said in an investor note that the company could use "even a slice" of its $2 billion in real estate that "could temporarily shun concerns around liquidity and thus, survivability," according to The Fly.
He added the company isn't out of the woods yet, which he's right about. Used car prices are falling, and financing is getting more expensive for consumers -- both of which could hurt Carvana's business.
Carvana will report its third-quarter financial results on Nov. 3, and investors may want to brace for more share price swings when it does.
Analysts' average earnings estimate for Carvana's third quarter is a non-GAAP (adjusted) loss of $1.95 per share -- much worse than the $0.38 loss in the year-ago quarter.
The company hasn't exactly given investors a lot to be optimistic about right now. And if it fails to meet analysts' consensus estimates for the quarter, it wouldn't be a surprise to see its share price decline further -- at least in the near term.