Carvana (CVNA) Stock Forecast & Price Target

Carvana Co has demonstrated significant improvement in its underwriting, particularly with a Deal Score that has continually risen since the 2023-N2 ABS issuance, resulting in an excess spread that expanded to 14.4% in the latest issuance. The company's strong integrated business model positions it to maintain a cost advantage over competitors, allowing for attractive pricing and potential market share gains amid rising tariffs. Furthermore, Carvana has achieved impressive EBITDA margins that are industry-leading, despite currently holding only a 1% share of overall industry sales, highlighting its operational efficiency and revenue-generating potential.

Carvana's financial outlook appears negative due to multiple factors, including anticipated multiple compression aligning the stock with traditional dealers, which may limit growth in adjusted EBITDA. The company faces increasing challenges from deteriorating sub-prime performance linked to inflated vehicle prices, tighter monetary conditions, and diminished consumer purchasing power following the depletion of pandemic-era savings. Additionally, potential long-term decreases in car ownership and ongoing supply constraints could lead to increased profit volatility and further hinder unit sales, ultimately jeopardizing Carvana's position in the market.