Carvana Stock Soars 26% in a Month: Is the Momentum Real or Just Hype?

Carvana CVNA is on a roll in the stock market. The used car e-retailer, known for its towering car vending machines and fully online sales model, is benefiting from favourable used auto market dynamics and improving unit economics thanks to cost containment measures.

After a whopping 280% surge last year, the stock is up 50% so far this year. Just over the past month, shares of Carvana were up 26%, outperforming close peers like Sonic Automotive SAH and Lithia Motors LAD. Shares of Sonic Automotive and Lithia Motors witnessed a 10% and 7% uptick, respectively, over the same timeframe.

1-Month Price Performance Comparison

Carvana’s impressive first-quarter 2025 results have added to its momentum. The stock is trading well above its 50-day and 200-day moving averages, with a Momentum Score of A — a technical nod to its strong upward trend.

But with such a steep climb, some investors are asking the obvious question — is the rally sustainable, or are we looking at hype getting ahead of reality? Let’s take a closer look.

What’s Fueling Carvana?

A few years ago, the company was teetering on the edge of bankruptcy. Many wrote it off. But instead of folding, Carvana made a bold pivot—and it’s paying off in a big way. Carvana’s stock surge hasn’t just been about hype. There’s real progress behind it—smart strategies that are showing up in its stronger results.

The turnaround started with disciplined leadership. Management rolled out aggressive cost-cutting measures and pulled off a critical debt restructuring. These moves gave Carvana the breathing room it needed. From there, the focus shifted to fixing operations from the inside out.

Behind the scenes, Carvana has improved almost every part of its business. It made its reconditioning process more efficient, reduced transport costs, and grew its wholesale segment. By optimizing network coverage, offering more finance and ancillary products, and applying smarter tech across operations, it started to see serious traction. Advertising also became more efficient, helping to drive demand at a lower cost.

Gross profit per unit, a key metric for auto retailers, improved meaningfully. Carvana’s total gross profit per unit (GPU) rose 8% in the last reported quarter, a key sign of better unit economics. The company is laser-focused on one core goal— driving more adjusted EBITDA per unit. In the first quarter of 2025, it posted a record $488 million in adjusted EBITDA — more than double from the prior year. CVNA holds the title of the most profitable public car dealer by adjusted EBITDA margin at 11.5%. That’s nearly triple that of peers like Sonic Automotive or Lithia Motors.

Importantly, Carvana still has plenty of room to grow. It’s already the second-largest used car retailer in the United States, yet it only holds about 1% of the total market. In a fragmented industry ripe for disruption, that’s a huge opportunity—especially as more shoppers look for a fully online car-buying experience. Retail unit sales of CVNA jumped nearly 46% in the last reported quarter as demand surged, and the company expects that momentum to continue throughout 2025.

Carvana is also finding strength in the current trade environment. While tariffs will raise prices of vehicles and create uncertainty, CEO Ernie Garcia believes Carvana’s value-focused used-car model may benefit as new car prices rise faster than used ones.

Carvana’s unique business model also deserves credit. Picking up a car from a giant vending machine? That’s the kind of experience people want to share and post about—it’s different and gives Carvana a cool edge. Sure, it lacks traditional perks like a test drive, but the seven-day return policy goes a long way in bridging that gap.

What Do Estimates Say for CVNA?

The Zacks Consensus Estimate points to strong earnings growth for Carvana—up 192% in 2025 and another 32.7% in 2026. On top of that, analyst estimates have been moving higher, showing growing confidence in the stock.

Conclusion

Carvana’s journey from near-collapse to becoming one of the most profitable public car dealers is remarkable. With strong momentum, improving financials, and a smart, tech-driven business model, the company is clearly on a solid path. Its focus on operational efficiency and EBITDA growth continues to impress, while analysts’ rising estimates and a Zacks Rank #1 (Strong Buy) underscore confidence in its future. Sure, the stock has had a big run, but Carvana’s growth story might still just be in the early chapters.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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