What To Do About Carvana

Carvana (CVNA), the online used-car retailer famous for its vending-machine-style delivery pods and seamless e-commerce platform, has engineered quite a run for the ages.

They came back when everyone wrote them off.

Don’t believe what people have to say about them!

From trading below $4 a share in late 2022—amid whispers of bankruptcy—to a staggering 7,816% surge over the ensuing three years, CVNA’s ascent feels downright bizarre.

Lockdowns and stimulus checks supercharged online shopping, propelling Carvana’s shares to an all-time high above $370 in August 2021 as used-car demand exploded.

But overexpansion, ballooning debt, and a post-pandemic used-car glut triggered a brutal collapse, with short-sellers piling in at 55% of the free float by 2022.

Fast-forward to December 2025: Carvana’s S&P 500 inclusion on December 22 has ignited fresh euphoria, with shares jumping 9% on the announcement and analysts eyeing 20% more gains amid anticipated Federal Reserve rate cuts.

Let’s unpack why this stock is both magnetic and menacing.

Aggressive cost-cutting—slashing 4,000+ jobs and streamlining logistics—has juiced unit economics, with gross profit per vehicle climbing and margins hitting the highest among public car dealers in 2024.

2024 marked profitability, a milestone carried into 2025 with year-to-date sales up and margins expanding as inventory management tightened.

As online auto adoption surges (projected to hit 30% of U.S. sales by 2030), Carvana’s first-mover edge shines, especially against laggards like CarMax, whose underwhelming quarters underscore CVNA’s superior model.

This isn’t speculative hype; it’s mechanical buying pressure, akin to the post-inclusion pops seen in stocks like Uber. Year-to-date 2025 gains of 97% reflect real momentum, fueled by debt refinancing that slashed near-term maturities and bolstered liquidity to $2.2 billion in cash against $6 billion in debt—a healthier 19.9% debt-to-equity ratio than the S&P average.

Innovations like AI-driven pricing and expanded vending machines position it for market share grabs, potentially 15-20% annually.

At $29 billion market cap versus $6 billion debt, leverage lingers like a hangover, vulnerable to rising rates or credit crunches—echoing 2022’s near-demise.

Why offload now, post-turnaround? It hints at peak pricing before cracks widen.

The used-car market’s cyclicality amplifies this—declining U.S. auto sales and inventory gluts from lease returns could crush margins if demand falters.

In the short-term, I believe we have reached the high-water mark, and this sugar high will need to come down a little.

The business model has its limits, and integrating a digital platform with used cars doesn’t have a monthly subscription model, which is painful in the tech ecosystem.

That means any surge higher should be a profit-taking opportunity, and this is one of them.

The risk is certainly to the downside as the US economy gets smushed from the weight of persistent inflation.

I would advise buyers to wait for a deep drop in shares to re-tread into this stock. The big gains have been locked in, and you don’t want to be picking up pennies in front of the steamroller.