No End in Sight for Carvana Stock Price Surge

The bull run in Carvana’s (NYSE: CVNA ) stock price shows no signs of slowing down as the company continues to gain market share in the industry. It is up 141% this year and over 445% in the past 12 months.

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Carvana is bigger than CarMax, Penske, AutoNation

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The surge has brought its total market cap to more than $25 billion, making it more valuable than Carmax, Penske Automotive Group, Lithia Motors and AutoNation combined.

Carvana’s comeback came after the company managed to restructure its debt, scale back its ambitions and resume growth and focus on profitability. In its most recent financial results, Carvana said its net income rose to a record high of $49 million, while its adjusted EBITDA rose to $235 million.

Carvana’s GAAP operating profit jumped to $134 million while its gross profit per unit (GPU) jumped to over $6,432. These results showed how well Carvana’s management was executing, just a few years after it nearly went bankrupt. This performance caught the attention of analysts, who raised their estimates. In a recent note, JPMorgan analysts said:

“We believe the company’s investments in infrastructure/networks, including ADESA’s physical auction business, are proving to be a long-term competitive advantage that is difficult to replicate. Therefore, we expect CVNA to continue to rapidly gain market share, while maintaining margins well above peers.”

Other analysts at JMP Securities, Evercore, and Needham have a moderately bullish estimate on Carvana stock. However, the current share price of $105 is below the average analyst estimate of $105.50.

Another likely catalyst for CVNA stock is that the Federal Reserve will eventually begin cutting interest rates later this year or in 2025. In most cases, new and used car sales tend to do well when the Fed cuts interest rates.

Carvana stock price analysis

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TradingView CVNA Chart

The daily chart shows that CVNA stock price has rallied significantly since bottoming out at $3.45 in 2022. This rally is in line with my recent forecast. It has remained above the crucial resistance point at $129.27, its highest point on May 6.

The stock has consistently remained above the 50-day and 25-day moving averages, while the Relative Strength Index (RSI) and MACD indicator have pointed upwards. In addition, the momentum oscillator has moved close to 25.

Therefore, the stock is likely to continue to rise in the coming weeks as investors await its earnings in August. If that happens, it is likely to rally and reach a high of $150, which is about $20 above its current level.