Carvana’s strong year-to-date rally may not be over, according to Bank of America, which reiterated its buy rating on the used car retailer and raised its price objective to $455 from $385.
The new target implies an upside of 13.8% from Friday’s close and reflects growing optimism around the company’s fundamentals and upcoming inclusion in the S&P 500 index.
Analyst Michael McGovern highlighted that S&P Dow Jones Indices will officially add Carvana to the benchmark index before the market opens on December 22.
Such additions typically act as catalysts for share appreciation as index funds and exchange-traded products tracking the S&P 500 are required to buy the newly included stock.
S&P 500 inclusion seen as key catalyst
McGovern noted that Bank of America had identified potential S&P 500 inclusion as the most significant catalyst for Carvana as early as June.
At the time, Carvana had already met the profitability requirements for several consecutive quarters.
However, he added that investor sentiment had become “slightly skeptical” in recent months over whether the company would be admitted, with concerns centering around voting rights.
The suspense around index eligibility boosted the impact of the final announcement.
With inclusion now confirmed, analysts expect a wave of mechanical buying from passive funds, which typically supports short-term price strength.
The move also provides validation for Carvana’s turnaround trajectory after years of volatility.
The company’s nearly 97% share price surge so far this year underscores renewed confidence in both operational execution and demand trends.
Fundamentals show stability despite earlier concerns
Carvana’s fundamentals remain solid, according to McGovern.
He attributed the stock’s recent momentum to improving data on unit volumes, which helped ease investor concerns stemming from the company’s earlier fourth-quarter guidance.
That guidance, issued by management, had sparked fears of a potential slowdown.
However, McGovern noted that consumer demand appears “stable/strong,” adding that the company is seeing limited signs of deceleration.
He pointed to market share gains over rival CarMax as a key factor driving this strength. Management’s strategy of reinvesting “fundamental gains” back into the business through lower pricing and reduced APRs is also contributing to steady customer growth.
The analyst believes that Carvana is on track to surpass CarMax in quarterly units sold at some point in 2026.
This would mark a symbolic milestone for the company as it seeks to consolidate its position in the competitive used-vehicle market.
Improved growth outlook and capital tailwinds
McGovern’s updated price target also incorporates a higher long-term growth outlook.
His revised assumptions project that Carvana’s management can maintain a compound annual unit growth rate of 20% between 2027 and 2032, up from the previous estimate of 18.5%.
In addition to operational performance, Carvana is benefiting from improvements in its capital structure.
The company has recently received credit rating upgrades, which could help reduce its cost of capital going forward.
The upcoming S&P 500 inclusion may further strengthen its financial position by increasing investor visibility and broadening access to institutional capital.
With nearly a doubling of its share price this year and renewed support from major institutions, Carvana enters its S&P 500 debut with significant momentum—though sustaining its rapid growth will remain the key challenge in the years ahead.
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