Can Carvana Stock Extend Its Strong 2025 Rally Into 2026?

Used car e-retailer Carvana Inc. CVNA has had a stellar 2025, with its shares gaining around 117% so far this year. In fact, CVNA was the best performing auto retail stock, handily outperforming close peers like CarMax KMX and Lithia Motors LAD. CarMax — being the largest retailer of used vehicles in the United States — has witnessed its stock price decline more than 50% year to date. Lithia Motors — one of the leading auto retailers of the country (selling both new and used vehicles) — has seen its share price decrease 3% in the same timeframe.

YTD Price Performance Comparison

Carvana has been one of the most exciting comeback stories. From being on the brink of collapse in 2022, the company has grown into the second-largest used car retailer in the United States. Early this week, Carvana officially joined the S&P 500 Index on the back of solid operational and financial performance and strategic growth.

Now, the question is whether Carvana can keep winning in 2026 after a stellar 2025. We think the company is well-positioned to continue its momentum.

CVNA Trading Above 50 & 200-Day SMA

Factors Driving CVNA’s Momentum

Carvana has rewritten the rules of auto retail. Instead of relying on a network of physical dealerships, the company operates a fully digital platform where customers can browse vehicles, arrange financing and schedule delivery online. Its well-known car vending machines are helping the brand stand out in a crowded market. Despite being the second-largest used car retailer in the country, Carvana controls only about 1.5% of the overall market. Given how fragmented the used car industry is, it leaves meaningful room for growth as more buyers become comfortable purchasing vehicles online.

That growth is already showing up clearly in the numbers. In the third quarter of 2025, Carvana sold a record 155,941 retail units, marking a sharp 44% increase from the prior year. Management expects demand to continue in the fourth quarter, with retail sales projected at around 150,000 units. These volumes reflect improving consumer confidence in Carvana’s platform and its ability to scale efficiently.

Financial performance is also improving. Adjusted EBITDA reached $637 million in the last reported quarter, up $208 million year over year, with industry-leading margins of 11.3%. For the full year, Carvana expects adjusted EBITDA between $2 billion and $2.2 billion, a significant step up from $1.38 billion last year.

A key driver behind these gains is operational efficiency. The company has lowered reconditioning and inbound transport costs by bringing more services in-house, standardizing processes, and using proprietary software to better manage logistics. Smarter network utilization and shorter transport distances have further reduced expenses. At the same time, broader customer sourcing and higher contributions from value-added services are lifting gross profit per unit.

The acquisition of ADESA’s U.S. operations has also strengthened Carvana’s position. ADESA adds scale to Carvana’s logistics, auction and reconditioning capabilities, improving both vehicle quality and throughput. Expanding the ADESA Clear digital auction platform across more locations further ties wholesale expertise with Carvana’s technology. Together, these initiatives are helping Carvana drive higher volumes at lower costs, supporting its ongoing momentum.

What’s Next for Carvana in 2026?

Cox Automotive expects used vehicle demand to remain steady in 2026, as affordability concerns continue to push customers toward lower-priced vehicles. Against this backdrop, Carvana’s strong unit growth, improving profitability and differentiated digital-first model give it a clearer runway to scale in a still-fragmented market. The company’s focus on operational efficiency and expanding margins should further support earnings growth, leaving room for additional upside heading into 2026.

The Zacks Consensus Estimate for Carvana’s 2026 sales and EPS suggests an increase of 31% and 37%, respectively, from the projected 2025 levels. Notably, the consensus EPS estimate for 2026 has been revised higher by 40 cents over the past 60 days, reflecting improving analyst confidence.

Currently, Carvana carries a Zacks Rank #3 (Hold) with a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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