VRM - JPMorgan sees favorable setup for Carvana Vroom and Lithia Motors

In a deep dive into the auto retail sector, JPMorgan says it expects digital retailers to benefit from a continued uptick in on-line penetration of used vehicles. The firm names Carvana (CVNA) and Lithia Motors (LAD) as core picks and calls Vroom (VRM) compelling. CarMax (KMX) is downgraded to Neutral from Overweight on concerns over same-store unit growth. Analyst Rajat Gupta, Ryan Brinkman and team: "On net, we see a favorable setup for the overall sector into 2021 with preference for used-only over franchise dealers. Based on our price targets for the sector, we see the most upside at OW-rated VRM as near-term expectations are reset and with potential for acceleration in both unit growth and gross profit into 2021, we view the setup as favorable in the near to medium term with few negative catalysts. We continue to like OW-rated LAD and CVNA as long-term core holdings, with further

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JPMorgan sees favorable setup for Carvana, Vroom and Lithia Motors