Should You Buy Carvana Stock Before Feb. 18?

Core Viewpoint - Carvana's stock has experienced significant volatility, with a recent decline of approximately 27% from its January peak, indicating potential challenges ahead as used car demand shows signs of weakening [1][10]. Company Performance - Carvana's revenue for Q3 2025 reached a record $5.65 billion, reflecting a year-over-year increase of 54.5%, with 156,000 vehicles delivered, showcasing a remarkable turnaround from near-bankruptcy in 2022 [5][4]. - Despite impressive past performance, the company's valuation appears stretched, and cash-flow trends are weakening, raising concerns about sustainability [10]. Market Dynamics - The demand for used cars is projected to decline, with retail sales expected to fall by 0.7% in 2026 to 20.3 million units due to lower new car production and weak electric vehicle demand [6]. - Average used car prices have increased to $28,550 in January 2026, up $490 year over year, which may challenge affordability for consumers [6]. Financing Environment - Financing costs for used cars are significantly higher, with loan rates between 10% to 12% APR compared to 6% to 7% for new cars, which could deter potential buyers and impact Carvana's growth [7][10]. - The increasing cost of financing makes the value proposition of used cars less attractive, especially when compared to new cars with promotional rates [7]. Insider Activity - There are concerning signs from insider trading, with CEO Ernest Garcia III selling over $1.4 billion in shares since April 2024, including more than $500 million in August 2025, raising agency risk concerns due to the Garcia family's control of 84% of voting power [9][10]. Regulatory and Legal Issues - Gotham City Research has accused Carvana of concealing over $1 billion in expenses through related-party transactions, which led to a significant drop in stock price [10]. Consumer Behavior - The market for buying used cars online has not yet become a habitual choice for consumers, making it a more considered purchase, especially in a high-interest rate environment [11].