In recent months, e-commerce and auto retail stocks have been on a rollercoaster ride. After plummeting through 2022, used car sellers rebounded as record sales led Carvana (CVNA) to a profit in 2025. Carvana, in fact, became the best-performing auto retailer stock in 2025, more than doubling in price on surging revenue and unit growth. With growth stocks cooling in early 2026, Carvana’s rally has petered out a bit and traders are wondering: Was it all hype?
Now Carvana’s board has approved a 5-for-1 split (pending shareholder vote) to “make whole shares more accessible” after that race. Let’s discuss what that means for CVNA.
Carvana is an online used car retailer that sells, finances, and delivers cars over the Internet. In fact, the company has become one of the largest used car dealerships in the US and has handled more than 4 million customer transactions so far.
As the company continues to expand its platform, management has been expanding logistics and delivery capabilities to improve the customer experience. It recently launched its same-day delivery service in Los Angeles, having previously launched it in Eugene, Oregon, and other metropolitan areas. These measures are intended to speed up deliveries and make the service more demanding.
At the same time, Carvana also made headlines by debuting at the Morgan Stanley Tech/Media conference in February, helping expose the name to institutional investors. Notably, Carvana landed on the S&P 500 ($SPX) at the end of 2025, a milestone that expands its ownership base.
Meanwhile, management has focused on strengthening the balance sheet as the used car market normalizes. On the capital side, the company’s debt is declining and inventory levels are being carefully managed amid falling auto prices. In summary, Carvana is moving forward with its expansion and integration plans to drive further growth.
That optimism has been seen in CVNA stock, which had a wild run in 2025. It’s up 70% over the year as the Carvana turnaround gained steam. Unit sales rose 43% in 2025 and revenue increased nearly 50%, fueling investor enthusiasm. In January 2026, CVNA peaked near $486, but has since given back a portion of those gains. Unfortunately, the stock is down about 27% year to date, underperforming its peers. The pullback was due to broader market weakness, profit-taking and some new doubts, for example a recent short-seller report and higher costs. Still, the company is growing strongly, so many bulls see the decline as an opportunity to accumulate.
The stock now trades at elevated multiples. CVNA is notably overvalued with a price-to-book ratio of 14, significantly higher than the industry median of 2, and a P/E ratio of 40, well above the industry median of 16. That shows CVNA is quite expensive relative to traditional auto dealers. But here it is the case that if Carvana achieves its ambitious goals, the multiples may seem justified; Otherwise, the stock could lose strength.
www.barchart.com
On March 13, Carvana’s board of directors approved a 5-for-1 forward stock split. Each shareholder of record on May 6 would get an additional 4 shares on a split-adjusted basis, trading at one-fifth of the previous May 7 price. Management says the division aims to keep the stock affordable, especially for its own employees under equity plans, after the stock’s strong run.
At first, investors liked the news. CVNA rose about 3% following the announcement. This reaction is not unusual. Market watchers point out that splits often trigger short-term rallies even though, in accounting terms, nothing fundamental has changed. The split does not add value on its own, but lower nominal prices can increase trading interest and signal confidence.
Chief Financial Officer Mark Jenkins noted that “significant stock appreciation” and record 2025 results prompted the split. In practice, does expands retail accessibility and often causes the ticker to jump when momentum traders pile in.
Carvana’s latest quarterly report for Q4 2025 was very strong and exceeded expectations. Revenue reached $5.603 billion, up 58% year over year, driven by 163,522 retail cars sold during the quarter, up 43% year-over-year. Gross profit also increased, although profit per car decreased slightly due to discounts and shipping offers, resulting in a total gross profit of about $1.05 billion, up about 38% from the previous year.
In short, Carvana made significant profits. Fourth-quarter net income reached $951 million, compared to $159 million a year earlier. Much of the increase was linked to a non-cash tax benefit, but even so, net margin rose to 17.0% from 4.5% last year.
Free cash flow was strong, with Carvana generating about $889 million in the trailing 12 months. The company ended 2025 with about $2.3 billion in cash and has been reducing its debt, retiring about $709 million in notes to strengthen its balance sheet.
CEO Ernie Garcia called it an exceptional quarter, noting that retail units grew 43%, the company surpassed $20 billion in annual revenue and reported $1 billion in net income and $2 billion in adjusted EBITDA. He added that Carvana is the most profitable auto retailer by a factor of two and the fastest growing by a wide margin.
Looking ahead, management reiterated that 2026 should bring significant growth in both sales and profitability, with higher sales volume and EBITDA expected in the first quarter compared to the fourth quarter. Analyst forecasts also point to continued expansion, with consensus estimates putting earnings per share in 2026 at around $6.9, up from $2.85 in 2025, along with stronger sales growth.
Wall Street remains very bullish on CVNA stock, although some are warning of Carvana’s turnaround as expectations are high. For example, UBS has a $485 price target on CVNA, reflecting strong confidence in the company’s long-term growth.
At the same time, RBC Capital cut its target from $500 to $440 with an “outperform” rating as momentum in the used car market softens. Citi also downgraded its rating slightly, moving its target to $465, and Wedbush cut it to $425. In contrast, Argus upgraded Carvana to a “strong buy,” although no target is given, considering the pace of the fourth quarter.
Morgan Stanley, a long-time Carvana bull, reaffirmed an “overweight” rating, and the JP Morgan team has targets in the $480 to $500 area.
The current 12-month consensus target is approximately $444. That implies an increase of around 46% compared to the current price. Finally, analysts note that while Carvana crushed the fourth quarter, “accounting transparency issues” from a January short-seller report and weakening used car fundamentals have given some investors pause.
www.barchart.com
On the date of publication, Nauman Khan had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
