Shares of Carvana Co. CVNA, -6.63% were surging more than 9% in premarket trading Tuesday after JPMorgan analyst Rajat Gupta ended his bearish call on the used-car retailer, upgrading the stock to neutral from underweight. Gupta wrote that Carvana was “not out of the woods” but that risks around the name “seem better understood.” He noted that Carvana shares have lost half their value since the close of Sept. 28, right before peer CarMax Inc. KMX, -1.22% posted its own results. “Worsening auto credit data points are clearly going to hurt CVNA’s new loan origination margins (as lenders have become more competitive, most recently reinforced by COF COF, -1.01% ), or likely come as the expense of volume in order maintain a quality book,” he wrote. “That said, unlike KMX, CVNA is not on the hook (only partially) for increasing charge-offs on prior originations and unlikely to suffer from the degree of write-down risk as KMX.” Gupta added that “a reset in fundamentals is needed” to make investors “re-engage” with Carvana’s stock, while “a credit cycle could drive further downside to equity value.” That said, “after the array of negative news over the last month, and continued underperformance vs. our broader coverage,” he is taking a more neutral view. Carvana shares have declined 96% over the past 12 months as the S&P 500 SPX, -0.75% has lost 18%.