Carvana just posted its 10th straight quarter of growth, yet the stock sold off because guidance came in light. Cars sold rose about 38% year over year. Revenue grew 52%. Some of that growth came at a cost: higher advertising spend, plus higher operating expenses tied to fuel and logistics. Those rising costs weighed on the stock.
The more useful signal sits in consumer behavior. Demand data shows shoppers keep picking Carvana at a faster pace. Since Carvana runs as an online platform, web visits matter, and they jumped about 64% year over year. Compare that to CarMax, the traditional and still larger player, whose visits rose 9%. The gap between the two keeps shrinking. In June, for the first time in this dataset, Carvana logged higher traffic counts by volume than CarMax. At this rate Carvana should catch CarMax on total units sold fairly soon.
Both companies are riding a rising tide in used car demand. High new car prices are spooking buyers, so many trade down into the used market. Used cars now outsell new cars almost 2 to 1, mostly on price.
The stock's turnaround is stark. Just a couple of years ago plenty of people wrote it off, and in 2022 there was a bankruptcy scare. Three years ago shares traded at $5. They now sit at $61.
Why buyers keep choosing Carvana
Sentiment data shows people genuinely like the experience. They can shop online, see the price they'll get for their own car, skip the haggling, avoid walking a lot, and avoid dealer back-and-forth over the final price. When that rising sentiment lines up with demand climbing this fast, it reads as a long-term bullish sign. On the chart, the yellow line tracks consumer demand and the dotted line tracks the stock price, and the demand curve is bending upward.
Carvana is also opening a new front. It recently started buying new car lots, stepping into what the company pegs as a $1.3 trillion addressable market. The company reported record sales of over 197,000 units. Management talks about a path to selling 3 million cars a year and hitting a 13.5% adjusted EBITDA margin sometime between 2030 and 2035.
The catch: profitability
Profitability came in lower than expected, and that has always been the pressure point for Carvana. Per car, the company makes far more than CarMax. This quarter the margin squeezed on each unit fell year over year. Two things drove that: advertising cost, meaning how much the company had to spend to win each conversion, and fuel costs feeding into the logistics side.
There is a real disconnect here. Demand is strong, interest is strong, growth projections are big, yet the stock moved down.
What to watch
The used car market at large is the main variable. Right now consumers can trade down, but if the economy softens further, buyers may pull back on car purchases entirely. On the other side, if conditions improve and shoppers start moving back up into new cars, the open question is whether Carvana is well positioned to capture that. Its move into new car lots is one answer.
Same-day delivery is expanding the service too, making a car purchase feel almost as easy as ordering a household item online.
My read: this is one of those cases where the demand data heads one way and the stock heads the other. That split is what makes it interesting. As the stock falls while demand keeps building, the long-term opportunity looks more compelling, and this looks like a winner.
