CVNA Stock: Can Carvana Sustain Its Disruptive Edge?

Founded in 2012, Carvana [CVNA] set out to do for used cars what Amazon [AMZN] did for books: move the entire buying process online. 

Customers were able to browse inventory, arrange financing, trade in an existing vehicle and take delivery without ever visiting a dealership. At the time, this felt radical.   

Today, Carvana is the largest online used car retailer in the US, having facilitated more than 5 million vehicle transactions. After a near-death experience in 2022, when rising interest rates and heavy debt loads sparked bankruptcy fears, management aggressively cut costs and improved unit economics. 

The turnaround has been dramatic: full-year 2025 revenue reached $20.3bn, retail unit sales rose 43% year-over-year to nearly 600,000 vehicles and net income approached $1.9bn. 

A pivot to bricks and mortar?

Earlier this week, Carvana announced it is extending its online retail strategy beyond used cars and into the new vehicle market, though not in the conventional dealership sense. Rather than selling cars directly on-site, the company plans to use its seven Stellantis-franchised [STLA] dealerships as service hubs, test-drive locations and “playgrounds” where customers can explore models before completing purchases online through Carvana’s platform.

The move marks the first detailed explanation of Carvana’s strategy for new vehicles since it began acquiring franchises in early 2025. After an initial purchase in Arizona, the network has expanded into key markets including Sacramento, San Diego, Dallas, Atlanta, Cleveland and Boston.

Carvana has invested roughly $171m in acquiring Stellantis-franchised dealerships, according to filings, excluding a more recent acquisition in Ohio. The strategy is indicative of a clearer push to blend online transaction flows with physical customer touchpoints in the new-car market.

CVNA stock fell more than 10% on the news, which coincided with its nearest rival, CarMax [KMX], reporting a Q1 earnings beat, as we’ll discuss below.

CVNA is down 25.52% in the year to date, but has been on a rollercoaster over the last 12 months. Still, it remains well above the dark days of 2022–23. 

Let’s dive into what’s driving Carvana’s recent progress.

Q1 results: pedal to the metal

Carvana reported Q1 2026 at the end of April.

“In Q1, Carvana delivered our sixth consecutive quarter of 40% or greater year-over-year retail unit growth while driving record financial results,” Ernie Garcia, founder and CEO, said in a statement.

The company sold 187,393 retail vehicles during the quarter, up 40% year-over-year, while revenue surged 52% to an all-time high of $6.4bn. By comparison, overall industry sales were broadly flat, highlighting Carvana’s ability to attract customers despite a challenging automotive environment.

Profitability remained strong. Gross profit rose 37% to $1.27bn, while GAAP operating income reached a record $581m, up $187m from the prior year. Net income came in at a record $405m, and adjusted EBITDA reached a record $672m. Margins eased slightly from exceptionally high levels a year earlier, with net income margin falling from 8.8% to 6.3% and adjusted EBITDA margin declining from 11.5% to 10.4%, though both remained among the strongest in the company’s history.

Management attributed the performance to the strength of Carvana's vertically integrated business model, which combines vehicle sourcing, reconditioning, financing and logistics within a single platform. Looking ahead, the company expects both retail unit sales and adjusted EBITDA to increase sequentially in Q2, setting new company records, and remains confident of delivering significant growth across both metrics for full-year 2026.

In short, Carvana delivered another standout quarter in Q1 2026, posting record sales, revenue and profitability as it continued to take market share in a largely stagnant used-car market.

View from the Street

This momentum has put Carvana on stock pickers’ radars.

Earlier in June, for instance, Morgan Stanley reiterated its ‘overweight’ rating on CVNA stock, and set a price target of $102, implying more than 60% upside from current levels.  

The firm identified Carvana as a “generational compounder”, citing strong profitable growth and unusually low capital expenditure driven by the acquisition of the ADESA auction network.

Morgan Stanley argues that the biggest risks to Carvana are macroeconomic. A weaker labour market, tighter credit conditions or a downturn in auto lending could reduce used-car demand and pressure the company’s financing business. Competition, particularly from CarMax, also remains a concern, as does the sustainability of Carvana's industry-leading margins.

The bull case depends on continued market share gains, retail unit sales consistently beating expectations and further operational efficiencies as the business scales. Investors will also be watching for new growth drivers beyond the core used-car platform.

It’s worth noting that not every analyst shares Morgan Stanley’s extreme bullishness on CVNA. Of the 24 opinions collated by Yahoo Finance in June, six are a ‘strong buy’, 10 a ‘buy’, seven a ‘hold’ and one an ‘underperform’. The average price target is $92.10. 

Who’s driving? KMX vs LAD vs CVNA

CMC Aureon recently compared CVNA to Opendoor [OPEN], which uses a similar model to sell real estate.Today, let’s line Carvana up against two companies that are competing for a slice of the same pie.

CarMax is Carvana’s most prominent like-for-like competitor, although their models differ. Carvana is fully digital, while CarMax blends digital tools with a massive physical footprint, offering larger inventory and 24-hour test drives. 

CarMax reported Q1 earnings yesterday. The company logged earnings of $1.31 per share on revenue of $8.0bn, comfortably ahead of consensus forecasts. However, concerns persisted over margin pressure and declining gross profit per used vehicle, while investors sought greater clarity on management’s turnaround strategy and its ability to offset softer industry conditions. Thus, despite beating expectations, CarMax shares fell 9%.

Lithia Motors [LAD], meanwhile, is one of the largest automotive retail groups in the US, operating a network of franchised dealerships alongside a growing digital platform, Driveway. The company’s strategy is explicitly omnichannel: customers can browse, finance and complete vehicle purchases online or in-store. Unlike pure-play online retailers, Lithia leverages its dealership footprint to support inventory, servicing and trade-ins. Its scale and hybrid model make it a key competitive benchmark for Carvana’s own push toward combining physical and digital car sales.

This is how the three stocks’ fundamentals currently line up.

Source: Yahoo Finance

Conclusion: the investment case for CVNA stock

Q1 momentum, improving unit economics and accelerating scale suggest the core online model is working, even as profitability normalises from peak margins. The company is also pushing beyond used cars into new vehicle retail, using franchised Stellantis sites as hybrid service and discovery hubs rather than traditional dealerships, in a gradual blending of digital and physical channels.

Against this, competition is intensifying. CarMax remains the closest rival, with scale and inventory depth, while Lithia Motors offers a more pragmatic omnichannel model that integrates dealerships with digital sales. Carvana’s edge is purity of execution, but the industry seems to be converging. The key question is whether it can stay ahead of that convergence long enough to justify its valuation.

CMC Aureon’s proprietary theme relevance system maps the world’s biggest investing megatrends. For in-depth analyses of stocks with high growth potential, subscribe to CMC Aureon Foresight.