Core Viewpoint - Carvana (CVNA.US) is set to be included in the S&P 500 index, effective December 22, which is expected to attract passive investment inflows and drive the stock price to a historical high [1] Group 1: Company Performance - Carvana's stock rose over 8% in pre-market trading on Monday, indicating strong market sentiment [1] - Bank of America analysts maintained a buy rating and raised the target price from $385 to $455, reflecting confidence in the company's financial performance and its inclusion in the S&P 500 index [1]

Core Viewpoint - Brokerage recommendations, particularly for Carvana (CVNA), suggest a favorable outlook, but reliance solely on these recommendations may not be prudent due to potential biases from brokerage firms [5][11]. Group 1: Brokerage Recommendations - Carvana has an average brokerage recommendation (ABR) of 1.63, indicating a position between Strong Buy and Buy, based on 23 brokerage firms [2]. - Of the 23 recommendations, 14 are Strong Buy and 3 are Buy, accounting for 60.9% and 13% of all recommendations respectively [2]. Group 2: Limitations of Brokerage Recommendations - Studies indicate that brokerage recommendations often do not effectively guide investors towards stocks with the highest potential for price appreciation [5]. - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, issuing five "Strong Buy" recommendations for every "Strong Sell" [6][11]. Group 3: Zacks Rank vs. ABR - The Zacks Rank, which classifies stocks from 1 (Strong Buy) to 5 (Strong Sell), is a more reliable indicator of near-term price performance compared to ABR [8][12]. - The Zacks Rank is based on earnings estimate revisions, which have shown a strong correlation with stock price movements, unlike the ABR that may not be up-to-date [13]. Group 4: Current Earnings Estimates for Carvana - The Zacks Consensus Estimate for Carvana's current year earnings remains unchanged at $4.85, suggesting stable analyst views on the company's earnings prospects [14]. - Due to the unchanged consensus estimate, Carvana holds a Zacks Rank of 3 (Hold), indicating a cautious approach despite the favorable ABR [15].