Carvana (CVNA) Valuation Check as S&P 500 Inclusion and Profitability Shift Drive Bullish Momentum

Carvana (CVNA) is suddenly back on a lot of screens as it gears up to join the S&P 500 on December 22, capping a long stretch of improving fundamentals and surging sentiment.

See our latest analysis for Carvana.

That S&P 500 promotion comes on the heels of a powerful run, with a 30 day share price return of 43.16% and year to date share price return of 128.34%. The three year total shareholder return of 10209.50% shows just how dramatically sentiment has swung in Carvana's favor.

If Carvana's rebound has you thinking bigger about what could rally next in auto retail, it might be worth exploring auto manufacturers as a way to uncover your next idea.

With Carvana now profitable, growing revenue at roughly 21% annually, and trading slightly above Wall Street targets, investors face a pivotal question: Is this a rare mispriced growth story, or is the market already discounting years of expansion?

Most Popular Narrative: 8.6% Overvalued

Compared with the last close at $455.68, the most widely followed narrative estimates fair value around $419, implying the recent rally now sits ahead of fundamentals.

The analysts have a consensus price target of $414.2 for Carvana based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $500.0, and the most bearish reporting a price target of just $330.0.

Read the complete narrative.

Want to see how aggressive revenue compounding, rising margins and a premium earnings multiple all stack together into that fair value call? The full narrative lays out a detailed growth runway, shows how profitability is expected to scale with it and reveals the future valuation multiple this story is built on, step by step.

Result: Fair Value of $419.45 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained 40 percent plus unit growth could strain logistics and reconditioning, while rising competition and pricing volatility may quickly erode today’s lofty expectations.

Find out about the key risks to this Carvana narrative.

Build Your Own Carvana Narrative

If you see the story differently, or want to dig into the numbers yourself, you can build a custom view in just minutes: Do it your way.

A great starting point for your Carvana research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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