If you invested $1,000 in Carvana Co (NASDAQ: CVNA) at the beginning of 2023, your investment would now be worth an astonishing $35,000.
This remarkable surge in value has propelled Carvana, an online used car retailer, ahead of AI giant Nvidia Corp, which has seen a gain of only 750% over the same period.
Carvana’s stock has skyrocketed more than 3,000% since January 2023, making its resurgence all the more impressive given that the company was on the brink of bankruptcy in late 2022.
The turnaround began with strategic cost-cutting measures and a comprehensive debt restructuring plan that has left shareholders happier than ever.
However, after such a phenomenal rally, many investors are left wondering if they’ve missed the opportunity to capitalize on this growth.
Why has Carvana stock done so well?
Carvana’s success can largely be attributed to its innovative approach to buying used cars, providing a more user-friendly alternative to traditional dealerships.
Typically, purchasing a used vehicle involves extensive paperwork and negotiations, along with limited inventory options.
In contrast, Carvana streamlines the process, allowing buyers to choose from a vast selection of vehicles and secure financing within minutes.
Moreover, Carvana offers delivery options for many cars at no extra charge, sometimes including a seven-day trial period, making it an appealing choice for car buyers.
This customer-centric approach suggests that Carvana stock may continue to perform well as it simplifies the car-buying experience.
Is there an upside left in Carvana shares?
The stock’s impressive performance is also tied to improving financials, as Carvana continues to attract new customers.
In the latest reported quarter, CVNA sold 2.31 times the number of units compared to the second quarter of 2019.
Despite this growth, the company still holds less than 1% of the U.S. used car market, indicating significant potential for further expansion.
Additionally, Carvana has recently reported positive earnings over the last two quarters, moving out of the red and into profitability.
This positive trend has led Wall Street to maintain an “overweight” rating on Carvana stock.
However, Carvana is not without its challenges.
The company carries approximately $5.6 billion in long-term debt, which could pose risks moving forward.
Competition is also intensifying, not only from established players like CarMax and AutoNation but also from traditional dealerships that are rapidly enhancing their digital offerings.
While replicating its extraordinary success over the past two years may prove challenging, Carvana still holds the potential for healthy returns for investors in the long run.
As the company continues to innovate and capture market share, it remains an intriguing option for those looking to invest in the evolving used car market.
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