The dramatic decline in shares of Carvana should not shake investor confidence in the stock's long-term potential, according to Morgan Stanley. The stock has been one of the names hit hardest during the move away from growth investments, with its share price being cut in half since late November. However, Morgan Stanley analyst Adam Jonas reiterated his overweight rating on Carvana, saying Monday in a note to clients that the thesis for the company is still intact. "We see CVNA at under $140 as a better risk/reward today than when the stock was at $40 2 years ago, as we believe it has only solidified its moat/competitive advantage in recent years and remains the apex predator in auto retail," the note said. One of the concerns around Carvana is how well the company will be able to fend off competitors who are following in the online car dealer space. That includes traditional dealers like Carmax as well as the automakers themselves. However, Jonas said Carvana is still well ahead of those competitors. "All the franchise dealers are attempting to build an online offering, but we remain skeptical due to the time to implement investments and cultural compatibility issues. Carvana has solidified its first mover advantage over many years now and has built a brand with strong customer rapport while putting in place ... infrastructure to support it," the note said. Morgan Stanley maintained its price target at $430 per share, which is more than 200% above where Carvana closed Friday. —CNBC's Michael Bloom contributed to this report.
Ernie Garcia, CEO, Carvana
Scott Mlyn | CNBC
The dramatic decline in shares of Carvana should not shake investor confidence in the stock's long-term potential, according to Morgan Stanley.