Here's Why Carvana Co. (CVNA) Surged in Q1

Optimist Fund, an investment management company, released its first quarter 2025 investor letter. A copy of the letter can be downloaded here. The first quarter was characterized by significant volatility, influenced by geopolitical tensions and uncertainties in global trade policy. While these macroeconomic factors caused short-term market fluctuations, they do not alter the firm’s long-term investment strategy or expectations for returns. The fund returned -4.9% in Q1 compared to -7.5% for its benchmark. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, Optimist Fund highlighted stocks such as Carvana Co. (NYSE:CVNA). Headquartered in Tempe, Arizona, Carvana Co. (NYSE:CVNA) is an e-commerce platform for buying and selling used cars. The one-month return of Carvana Co. (NYSE:CVNA) was 38.47%, and its shares gained 144.04% of their value over the last 52 weeks. On May 8, 2025, Carvana Co. (NYSE:CVNA) stock closed at $285.53 per share with a market capitalization of $32.908 billion.

Optimist Fund stated the following regarding Carvana Co. (NYSE:CVNA) in its Q1 2025 investor letter:

"Carvana Co. (NYSE:CVNA) – Carvana posted an outstanding fourth quarter, with retail cars sold up 50% year-over-year and revenue rising 46%, making it the company’s second-best quarter ever for sales. Profitability reached record levels, with net income of $159 million and an adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) margin of 10.1%—capping off 2024 as Carvana’s first year of consistent quarterly net income. While some investors remain cautious due to its leveraged balance sheet, we believe those concerns will diminish as profitability continues to scale. In our view, Carvana is well on its way to becoming a widely recognized, high-quality business with meaningful long-term upside."

Carvana Co. (NYSE:CVNA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 84 hedge fund portfolios held Carvana Co. (NYSE:CVNA) at the end of the fourth quarter, compared to 66 in the third quarter. Carvana Co. (NYSE:CVNA) reported revenue of $4.232 billion in Q1 2025, up 38% from Q1 2024. While we acknowledge the potential of Carvana Co. (NYSE:CVNA) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered Carvana Co. (NYSE:CVNA) and shared the list of stocks on Jim Cramer’s radar. Patient Capital Opportunity Equity Strategy initiated a position in Carvana Co. (NYSE:CVNA) during Q1 2025. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.