Carvana's Market Recovery Sparks Investor Interest

Investor Analysis: Carvana's stock has surged from its lows, reflecting a turnaround in the used-car market, with strong EPS growth expected. However, Amazon remains a more compelling long-term investment due to its robust growth and valuation, despite recent performance gaps.

Date: 09-02-2025

AI Rating: 6

Carvana's Recovery and Earnings Prospects

Carvana (CVNA) has experienced significant fluctuations since its IPO in 2017, reaching record highs before a drastic decline influenced by macroeconomic factors. As of now, Carvana's stock is valued at approximately $255 following a recovery led by interest rate stabilization and an upswing in demand in the used-car market.

In the past years, Carvana's units sold reflected a turbulent trend with a remarkable 37% growth in 2020 and 74% in 2021. However, these figures sharply declined in subsequent years, with a downturn of 3% in 2022 and 24% in 2023. Despite these setbacks, Carvana has reported renewed growth with a 28% increase year on year during the first nine months of 2024, fueled by lower interest rates and expanded online presence. The company expects this positive trend to continue into the fourth quarter of the year.

Carvana's projected earnings per share (EPS) is anticipated to rise at a compound annual growth rate (CAGR) of 72% from 2023 to 2026, while analysts estimate its revenue to grow at a CAGR of 20%. Such significant projected EPS growth could indicate a strong recovery and an attractive opportunity for investors looking for high-return stocks.

Amazon's Steady Growth

On the other hand, Amazon (AMZN) has also shown resilience with its revenue climbing by 12% in 2023 following a reduction to 9% in 2022. The company's continued expansion in the e-commerce arena and its cloud services, particularly with Amazon Web Services (AWS), remains instrumental for future growth. Amazon's impressive growth trajectory, plus the expectation of a 38% CAGR in EPS from 2023 to 2026 provides a compelling long-term investment narrative.

In summary, while Carvana has made significant strides in recovering its market position, Amazon maintains a more stable and attractive long-term investment profile due to its strong growth capabilities and market leadership, despite a softer recent performance. Investors might be inclined to consider long-term prospects where Amazon could outperform Carvana.

Stocks: CVNA AMZN