Carvana Stock More Than Doubled in 2025. Can It Keep Soaring In 2026?

Core Insights - Carvana has experienced significant growth in 2025, with shares more than doubling year to date, indicating a strong recovery from previous challenges [1][2] - Despite improved business fundamentals, there are concerns that stock expectations may have outpaced actual business performance [2][9] Business Performance - In Q3, Carvana sold 155,941 retail cars, a 44% increase year over year, showing acceleration from Q2's 41% growth [4] - Revenue for Q3 rose 55% year over year to approximately $5.65 billion, outpacing unit growth [4] - Carvana reported a net income of $263 million in Q3, with a net income margin of 4.7% and operating income of $552 million [5] Profitability Metrics - The gross profit per retail unit was $7,362 in Q4 2025, reflecting a minor decrease of $65 compared to the previous year, indicating disciplined management despite sales growth [6] Market Position and Future Outlook - Carvana currently captures about 1.5% of the U.S. used car market and 1% of the total U.S. car market, suggesting significant growth potential [7] - The company forecasts Q4 retail unit sales to exceed 150,000 and expects full-year 2025 adjusted EBITDA to be at or above $2.2 billion [7] Valuation Concerns - Carvana's stock trades at a price-to-earnings ratio of 99 and a forward price-to-earnings ratio of 65, raising questions about whether the stock is overvalued [9] - The company is investing in growth, with plans to reach an annual retail production capacity of over 1.5 million units by the end of 2025, which is 2.5 times its current sales volume [10] Investment Sentiment - There is a debate on whether Carvana's stock is undervalued, fairly valued, or overvalued, with some analysts suggesting it appears slightly overvalued despite strong business momentum [11]