Carvana, the trailblazing online used-car dealer famous for its unique car vending machines, is poised to make a notable entry into the S&P 500 index, marking the peak of an impressive three-year recovery that has seen its market value surpass long-established carmakers like GM and Ford.
On Monday, Carvana’s shares soared by 12.5%, reaching an all-time high and extending their 10-day winning streak. The stock has nearly doubled in value this year.
Carvana’s remarkable comeback, following fears of debt default and potential bankruptcy in 2022, aligns with a K-shaped economic recovery in the U.S. Here, lower-income consumers, strained by tariffs and inflation, flocked to used-car lots, while wealthier buyers sustained new vehicle sales.
“It’s a captivating narrative, one of tremendous growth post-pandemic, followed by a dramatic collapse, and then a vigorous resurgence,” said Chris Beauchamp, an analyst at IG Group.
“If we anticipate the Fed to cut rates again, which would alleviate consumer pressures, there’s still considerable momentum ahead,” he added.
Since hitting record lows in 2022, Carvana’s stock has skyrocketed by over 8,000%, as the company emphasized improved cost management, debt reduction, and a surge in demand that helped it achieve profitability.
However, in January, short-seller Hindenburg Research criticized Carvana, labeling its recovery a “mirage” and alleging $800 million in loan sales to an undisclosed related party, along with manipulated financials to temporarily inflate reported income. Carvana dismissed the report as “intentionally misleading and inaccurate.”
The astonishing rise in Carvana’s stock has elevated its market value to nearly $97 billion, surpassing Ford’s $52 billion and General Motors’ $71 billion.
Carvana’s shares trade at a forward earnings multiple of 57.4, significantly higher than the single-digit figures of its Detroit counterparts.
“It’s a long-term ‘buy,’ and I’d take advantage of any pullbacks to enhance the long-term growth story and market share expansion,” remarked Stephanie Link, chief investment strategist at Hightower Advisors.
The inclusion, announced by SP Dow Jones Indices late on Friday, will take effect on December 22 and is expected to trigger purchases from index-tracking funds.
Carvana has gained popularity among retail investors, who often invest in high-momentum and heavily shorted stocks.
“It continues to have a devoted investor base who believe in their model’s potential to capture more market share and enhance profitability,” said Rick Meckler, a partner at Cherry Lane Investments, a family investment office.
Carvana’s recent gains have cost bearish investors approximately $1 billion in losses, according to data analytics firm Ortex. Overall, short interest is at its lowest level in years as the company’s fundamentals have improved.
In the third quarter, Carvana sold a record 155,941 retail units, while total revenue soared by 55% to $5.65 billion compared to the previous year, as reported in October.
According to an analyst in November, the company might surpass larger competitor CarMax in quarterly used-car sales volumes by the fourth quarter of 2026.
