Carvana's (CVNA) retail unit sales are a key driver of its growth and market share gains are stronger than what street estimates reflect, RBC Capital Markets said in a note emailed Tuesday.

The company's gross profit per unit remains significantly above industry averages due to its higher proportion of retail acquisitions, finance participation, and lean cost structure, according to the firm.

"We believe retail marketplace can become a more meaningful contributor to unit growth over time as the company expands its commercial fleet partnerships," RBC added.

The firm said it anticipates a shift in perception around Carvana's balance sheet health as it is making progress in strengthening its financial position, with efforts to pay down debt, refinance obligations, and move toward sustainable free cash flow.

RBC raised its rating on Carvana to outperform from sector perform and increased the price target to $280 from $270.

Price: 198.22, Change: +9.37, Percent Change: +4.96