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Carvana’s Best Quarter Ever — Stock Still Down 30%

Record everything. That’s genuinely what happened at Carvana (NYSE: CVNA) in Q1 2026. And yet the stock is sitting roughly 30% below its January highs as of late May — after a 5-for-1 forward stock split took effect on May 8 — while analysts argue over whether the valuation makes any sense at all.

Here’s the tension: operationally, this company is executing at a level few expected two years ago. Financially, the debate about what it’s actually worth is as polarized as any large-cap name in the market right now.

Analyst Targets (Split-Adjusted)

Note: All price targets below reflect post-split pricing (5-for-1 split effective May 8, 2026).

• Evercore ISI — PT lowered to ~$78 (from ~$86) | In Line rating
• Barclays — PT $93 | Overweight (maintained post-split)
• Baird — PT raised to $88 (from $80)
• BTIG — PT ~$91 | Buy (reiterated)
• Wall Street consensus — Buy | avg. PT ~$87–$93 across 24 analysts covering the stock

The Numbers (Q1 2026)

• Revenue: $6.43B vs. $6.02B expected (+52% YoY)
• EPS: $1.69 vs. $1.56 expected (beat by ~8%)
• Retail units sold: 187,393 — up 40% YoY, sixth consecutive quarter of 40%+ unit growth
• Adjusted EBITDA: $672M (10.4% margin, down from 11.5% a year earlier)
• GAAP operating income: $581M (record)
• Net income: $405M, up from $373M in Q1 2025
• Net debt to trailing 12-month adjusted EBITDA: 1.1x — the strongest balance sheet position in company history
• Total debt: $5.0B | Cash: $2.4B | Total assets: $13.8B

Q2 guidance: sequential increases in both retail units and Adjusted EBITDA, targeting all-time company records on both metrics. Carvana is also hosting an investor and analyst tour at its Elyria, Ohio reconditioning center.

Why It Matters

The volume story is undeniable. Carvana has now delivered 40%+ retail unit growth for six straight quarters — in a used car market that’s been anything but easy. The company describes itself as the fastest-growing and most profitable automotive retailer for nine consecutive quarters. At $6.43 billion in quarterly revenue, this is no longer a speculative story. It’s a scaled business with actual net income and a margin structure that, despite some compression, is holding up better than most bears expected.

Worth flagging — the used car market is an interesting read on the broader consumer right now. Tariff uncertainty and new-car affordability pressures have pushed more buyers toward used vehicles. Carvana is sitting in a structurally favorable position, whether or not management explicitly planned for it. The 40% unit growth substantially outpaced the broader used vehicle market, which showed roughly flat retail sales in Q1.

The one real concern in the quarter: adjusted EBITDA margin contracted year-over-year from 11.5% to 10.4% despite the volume surge. Management attributed part of the compression to wholesale prices appreciating faster than retail prices — a dynamic they called transitory, with retail prices expected to catch up. That’s the key claim the market is watching.

The Valuation Problem

This is where it gets complicated. The stock carries a high-volatility profile — pre-split beta was cited at 3.61 at the time of earnings, meaning it was moving more than three times the broader market in both directions. That kind of sensitivity doesn’t disappear with a stock split.

The bull case has genuinely improved in one area that often gets glossed over: the balance sheet. Net debt to trailing 12-month adjusted EBITDA now sits at 1.1x — the best in company history. That’s a meaningful change from the overleveraged story of two years ago, and it matters for any fair valuation.

Bears, though, point to the margin compression, revenue recognition questions, subprime loan securitization opacity, and the $5.0B in total debt alongside a $2.2B tax receivable agreement liability. The stock has also seen notable insider selling — roughly $27M in shares offloaded over the past three months, with no buying activity. Both camps have been making roughly the same argument for two years. What’s changed is the balance sheet. What hasn’t changed is the margin trajectory debate.

Bull / Base / Bear

All price levels below are split-adjusted.

• Bull: EBITDA margin recovers toward 12–13% by 2027, reconditioning scale advantages compound, Q2 delivers all-time records and the market begins assigning a higher multiple. Stock reclaims $90+.
• Base: Volume growth moderates to 25–30%, margins stabilize near current levels, valuation stays range-bound. Stock drifts between $74–$84 on a split-adjusted basis.
• Bear: Macro softness hits used car demand, subprime loan quality deteriorates, margin pressure intensifies. High leverage becomes a liability again. Stock retests $60 or lower.

Technical Overlay

Following the 5-for-1 stock split effective May 8, CVNA is trading in the $64–$68 range on a split-adjusted basis as of late May. The 52-week split-adjusted high is $97.38 (reached in January 2026); the low is $54.46. A roughly 30% decline from January highs despite record fundamentals reflects how much risk premium the market is demanding here. Near-term split-adjusted support sits around $64–$65. A sustained move above $72–$75 would suggest the stock is stabilizing after post-split volatility. High-beta names like this tend to move quickly in either direction — the upcoming Q2 earnings report (expected July 30) and the Elyria investor day are the next meaningful catalysts.

What to Watch

• EBITDA margin trajectory — any recovery toward 11–12% would be a positive signal
• Retail GPU (gross profit per unit) stabilization as wholesale/retail price spreads normalize
• Q2 unit volume guidance execution — management has committed to all-time records
• Insider selling activity — $27M sold in the last three months with no purchases
• Analyst estimate revisions following the Elyria investor day
• Macro signals: used car affordability, consumer credit quality, tariff pass-through effects

Bottom Line

Carvana is doing something operationally remarkable — nine straight quarters as the fastest-growing and most profitable automotive retailer in the country, now with a materially cleaner balance sheet than it had two years ago. Whether the stock reflects that depends almost entirely on your view of the margin trajectory and whether the 10.4% EBITDA margin represents a floor or a warning sign. The bulls have real data. The bears have real concerns. What’s genuinely changed is the leverage picture. What hasn’t is the fundamental disagreement over where margins go from here — and that’s what determines the next move.

For informational purposes only.