Carvana (CVNA) remains a compounder with years of market gains ahead after posting a solid Q1 rebound, RBC Capital Markets said in research report emailed Friday.

The company's robust Q1 results come after a Q4 gross profit per unit misstep that cast doubt on its margin expansion and execution abilities, according to the note.

Retail units beat rendered the forward setup attractive, but Q2 retail GPU is likely to face headwinds amid lagging pricing, analysts wrote.

The company said that with around 2% market share in the US used vehicle retail market, it remains in the initial days of customer awareness and adoption, RBC noted.

Advertising has been ramping on a per-unit basis in recent quarters, which the company views as a critical component of the growth strategy alongside improving the customer experience and growing inventory selection, according to the brokerage.

The brokerage said it reiterated its outperform rating on the stock and boosted its price target to $460 per share from $440.

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