Carvana, the online used-car retailer, has experienced a staggering 4,000% increase in its stock value over the past two years, a testament to its remarkable turnaround from near-bankruptcy in late 2022. As of early 2025, the stock trades at around $189 per share, marking a 260% rise since the beginning of 2024. This growth significantly outpaces the S&P 500's 25% increase over the same period, while its competitor CarMax saw only a 4% rise.

The company's recent performance has been bolstered by three consecutive quarters of net profit, with Q3 earnings at $1.26 per share, a 65% drop year-over-year but still surpassing market expectations of $0.25 per share. Carvana reported a 34% increase in vehicle sales units in Q3, with expectations of further growth in Q4, indicating sustained sales momentum. The company's sales grew 32% year-over-year to $3.7 billion, and its adjusted EBITDA margin improved to 11.7% in Q3, a significant 6.4 percentage point increase.

However, Carvana's journey has not been without challenges. A short-seller attack by Hindenburg Research in early 2025 accused the company of undisclosed related-party transactions and overvaluation, leading to a 7% decline in its stock price. Carvana vehemently denied these allegations, calling them "misleading and inaccurate." Despite the initial drop, the stock rebounded over the following sessions, supported by Wall Street analysts who largely stood by the company.

Notably, RBC Capital upgraded Carvana's stock from sector perform to market perform, with a price target of $280, viewing the sell-off as a buying opportunity. Other analysts, including those from JPMorgan, Wedbush, and Needham, maintained positive ratings, dismissing Hindenburg's claims as exaggerated or old news. The company's renewed agreement with Ally Financial to buy up to $4 billion of its loan receivables over the next year further bolstered investor confidence.

Looking ahead, Carvana's growth potential remains significant, with a current market share of only 1% in the used car sales industry, which sees approximately 40 million transactions annually. The company's innovative online model, offering a curated inventory of inspected and reconditioned vehicles with flexible delivery options, provides a competitive edge over rivals like CarMax, which face higher operational costs.

Despite its impressive growth, Carvana's stock remains volatile, with annual returns far from consistent compared to the S&P 500. The company's debt restructuring in early 2023 played a crucial role in its recovery, but the expiration of this arrangement in Fall 2025 could impact profitability as interest payments resume. Investors are advised to monitor these developments closely as they navigate the future of Carvana's stock in 2025.