Carvana: A Perfectly Good Opportunity, Probably

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Carvana. The name sounds like a particularly enthusiastic Italian nonna, doesn’t it? Anyway, the stock has recently been experiencing what one might politely call a ‘correction’. Down ten percent since last week, thirty percent from January’s high… it’s enough to make one reach for the smelling salts. Or, if you’re like me, just another cup of tea. The financial press is, naturally, having a field day, predicting doom and gloom. But here’s the thing about doom and gloom: it’s often a splendid time to actually buy something.

A Quarter That Wasn’t Terrible, Just…Uninspiring

Let’s be honest, the fourth quarter wasn’t exactly a triumph. Gross profit per retail unit dipped a bit – from $6,916 to $6,562. Which, when you think about it, is still a substantial amount of money for a used car. It’s enough to buy a very nice collection of antique teapots, for instance. Adjusted EBITDA was a little light of expectations. But here’s where things get interesting. They haven’t offered much in the way of specific guidance for the year ahead. A bit vague, perhaps. They’re expecting growth, naturally. Everyone always expects growth. But they’re hedging their bets with a lot of “assuming the environment remains stable” language. Which, in the world of economics, is roughly equivalent to saying, “If pigs might fly…”

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But all this hand-wringing over a slightly disappointing quarter and a lack of crystal-ball clarity is, I suspect, missing the bigger picture. Investors, bless their hearts, are often terribly short-sighted. They focus on the immediate, the visible, the things that make them fretful. And fretting, it turns out, is remarkably bad for investment decisions.

The Curious Case of the Aging Automobile

Let’s talk about cars. Americans, it turns out, are driving older cars than ever before. The average vehicle on the road is now a record-breaking 12.8 years old. That’s…quite old. Older than some countries, in fact. And at a certain point, the cost of keeping a geriatric automobile running exceeds the cost of simply replacing it. It’s a grim calculus, but a surprisingly reliable indicator of future car sales. New car sales are…well, sluggish. Around 16.3 million last year. Not terrible, but not exactly setting the world on fire. And the average price of a new car? A hefty $49,191. Enough to buy a small island in Scotland, possibly.

Cox Automotive predicts things won’t improve much in 2026, with new car sales dipping to 15.8 million. Which is where Carvana, and other used car retailers, come in. Carvana, despite its growth – 596,641 retail units and 297,643 wholesale cars last year – still only controls a little over 2% of the used car market. That’s a surprisingly small slice of a very large pie. And even if per-unit profitability doesn’t suddenly leap into the stratosphere, sheer market penetration will provide growth. It’s simple arithmetic, really.

Growth, It Seems, Is Still a Thing

Carvana’s fourth-quarter revenue was up a respectable 58% year over year, fueled by a 43% increase in retail units sold. Analysts are predicting more of the same for at least the next couple of years. Now, I’m not a fortune teller, and I wouldn’t trust an analyst as far as I could throw them, but it seems reasonable to assume that people will continue to need cars. And that, despite all the gloom and doom, is a rather powerful tailwind.

So, while the financial press is busy predicting the end of days for Carvana, I’m cautiously optimistic. The stock has taken a beating, yes. But sometimes, the best opportunities are found amongst the wreckage. It’s a bit like rummaging through a dusty antique shop – you never know what treasures you might uncover. And, frankly, a bit of a bargain is always welcome.

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2026-02-25 11:22