Carvana stock surges on S&P 500 inclusion, marking dramatic turnaround
Carvana (CVNA) stock surged as much as 11% Monday after the online car retailer was tapped to join the S&P 500 (^GSPC), marking a dramatic turnaround for the once heavily shorted company.
On Monday, shares surged to a high of $445 ahead of their inclusion in the broad-based index's Consumer Discretionary (XLY) category on Dec. 22.
The move follows a stretch of record sales and units sold, with the company reaffirming its long-term goal of selling 3 million cars within the next five to 10 years.
On Monday, BofA analysts reiterated their Buy rating on the stock and raised their price target to $455 from $385.
Read more about Carvana's stock moves and today's market action.
The firm's researchers noted that they've been calling an S&P 500 inclusion a "top potential catalyst" since June, as the company has met the profit requirements for several quarters now while gaining market share against competitor CarMax (KMX).
"We see consumer demand as stable/strong, leading to little deceleration, in part driven by share gains vs. CarMax," BofA analyst Michael McGovern wrote in a note.
"We expect Carvana to surpass CarMax in quarterly units sold at some point in 2026," he added.
In its third quarter shareholder letter on Oct 29, the company said, "We were once again the most profitable and fastest growing automotive retailer. And once again by significant margins."
The company reported a net income margin of 4.7% which was "more than 2x the industry average in the quarter."
Carvana also highlighted growing customer adoption of its fully online model, noting that over 30% of buyers now complete the entire transaction without interacting with a customer advocate until pickup or delivery, while more than 60% of sellers do the same.
Read more: How to buy a car without a co-signer: A guide for first-time buyers
The Tempe, Ariz.-based online car platform represents one of the most dramatic turnaround stories in recent years, burning short sellers who bet against its stock along the way.
Shares of Carvana are up more than 10,000% from their all-time lows of below $4 in December 2022, when the retailer was facing bankruptcy speculation.
Last year, the company posted its first-ever annual profit, with CEO and chairman Ernie Garcia telling analysts, "It's very hard for a group to go through a period like the last two years and not disintegrate under the pressure. We didn't disintegrate."
Wall Street analysts have turned increasingly bullish on Carvana over the past two years. The stock has 18 Buy ratings, six Holds, and two Sells.
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