What's Behind The 240% Rise In Carvana Stock?

Company Performance - Carvana has experienced a significant turnaround, with its stock price rebounding from under $5 in late 2022 to around $180 per share in January 2026, marking a 236% increase since the beginning of 2024 [1] - The company posted its third consecutive net profit in Q3 2024, with earnings of $1.26 per share, a 65% year-over-year (y-o-y) drop, but still surpassing market expectations of $0.25 per share [2] - Carvana reported a 34% y-o-y increase in vehicle sales units in Q3 2024, with expectations of sequential unit growth acceleration in Q4, indicating sustained strong sales momentum [2] - Sales grew 32% y-o-y to $3.7 billion in Q3 2024, and the adjusted EBITDA margin increased by 6.4 percentage points to 11.7% [2] - The company's net income for the first nine months of 2024 was $131 million, or $1.01 per share [3] Debt Restructuring and Financial Health - Carvana's debt restructuring initiative implemented in early 2023 played a pivotal role in its recovery, with the stock increasing approximately 40-fold over two years [3] - The debt restructuring deferred debt maturities and reduced annual interest expenses by approximately $450 million over two years [3] - The debt restructuring arrangement is set to expire in Fall 2025, which may require Carvana to resume interest payments, potentially impacting profitability [3] Market Position and Growth Potential - Carvana currently holds a 1% market share in the used car sales industry, which facilitates approximately 40 million transactions annually [4] - The company's innovative approach, including an online inventory of inspected and reconditioned vehicles, flexible delivery options, and elimination of traditional sales interactions, provides a competitive advantage over rivals like CarMax [4] Stock Performance and External Factors - Carvana's stock price has declined around 12% since the onset of 2025, primarily due to allegations made by Hindenburg Research regarding undisclosed related-party transactions and material information [5] - Carvana has denied these allegations, calling them "misleading and inaccurate" [5] - The company's stock performance over the last four years has been volatile, with annual returns more inconsistent than the S&P 500 [6] Comparative Performance - The Trefis High Quality Portfolio, consisting of 30 stocks, has provided better returns with less risk compared to the S&P 500 over the last four years, outperforming Carvana's stock [6]