Two Reasons To Stay Away From Carvana Stock
During the second quarter of 2026, Carvana (CVNA) grew its revenue 52% to hit a company record, while also selling 38% more retail cars. Even with this rapid expansion, the stock has lost 15.1% over the past twelve months, significantly trailing the 17.1% return of the S&P 500. Shareholders are finding out that high top-line numbers do not guarantee market rewards. So why would you stay away from a company growing this fast?
On Earnings, Carvana Is Priced Above The S&P 500
Valuation provides the first warning sign. Carvana stock trades at 28.7 times earnings, compared to 21.5 for the S&P 500.
Investors are clearly not paying that premium for current profitability. Carvana’s operating margin over the past twelve months was 8.9%, trailing the 18.5% margin recorded by the broader index. The market appears to be pricing in sustained expansion instead. Carvana has averaged annual revenue growth of 30.8% over three years, far outpacing the 5.8% pace set by the S&P 500. Anyone acquiring shares at today’s price is heavily reliant on those growth rates holding steady.
Can Carvana Get Enough Cars Ready To Sell?
The company has struggled to meet its own supply needs so far. During the second-quarter call in July, management identified a notable headwind: inventory had expanded at a slower pace than sales for several months.
However, demand remains solid whenever vehicles actually hit the lot. To clear this bottleneck, Carvana has been expanding its capacity to prepare cars across its ADESA facilities and existing inspection centers. The strategy yielded clear results in the second quarter. Regions with the heaviest capacity investments saw inventory grow 57% and sales grow 54%. By contrast, areas with the lightest upgrades saw inventory grow 17% and sales grew 30%.
Despite that underlying demand, the internal profit outlook is cautious. Management forecast adjusted EBITDA, a profit measure before interest, taxes and depreciation, to land between $2.7 billion and $3.0 billion for 2026. That marks an increase from $2.24 billion last year. Carvana’s second-quarter result was already running at an annual rate above $3 billion. The top end of that range is no higher than the yearly pace Carvana already hit in the second quarter. On the July call, an analyst noted the guidance implies a step down in the second half.
How Much Has Carvana Lost When Stocks Sold Off?
Historical volatility provides a second reason for caution. The stock has underperformed the S&P 500 during three past shocks by a wide margin. When the 2025 tariff shock hit, Carvana stock fell 42%, compared to a 19% decline for the S&P 500. During the 2023 yield shock, shares fell 41% while the index lost 9.5%. The damage was even more severe in the 2022 inflation shock, when Carvana stock lost 94% against a 24% retreat for the broader market.
Given the severity of these drawdowns, the size of your position in Carvana matters a great deal.
What Should You Watch In Carvana’s Next Report?
Moving forward, the critical metric to monitor is the number of cars Carvana sold to retail customers during the third quarter. On the July call, management stated they expected to sell more retail cars in the third quarter than in the second, when the company sold a record 197,325. Independent indicators support this optimism. In late September, Jefferies noted that website data showed Carvana’s vehicle sales growth accelerating to about 40% in recent weeks. Delivering a count clearly above 197,325 would confirm the company is getting cars ready fast enough to keep growing. A count at or below that threshold, however, would fall short of management’s own guidance.
How To Act On CVNA?
Now you know CVNA better. And that’s our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.
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