Carvana Just Entered the New-Car Business. Here Where the Stock Could Go

Key Stats for Carvana Stock

• Current Price: $66.56
• Target Price (Mid): ~$147
• Street Target: ~$92
• Potential Total Return: ~121%
• Annualized IRR: ~19% / year
• Max Drawdown: 41.21% (March 20, 2026)

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What Happened?

Carvana Co. (CVNA) spent years telling people they never had to set foot in a dealership. Now it runs seven of them. On June 16 and 17, the company unveiled a “New Car Experience Paradise” at a Stellantis store in Dallas, selling Jeep, Ram, Chrysler, and Dodge alongside its used inventory. The market could not decide what to make of it. Shares popped, then fell about 10% the next day as rival CarMax (KMX) warned that industry costs were running high, then snapped back 5.89% on June 18 to close at $66.56.

That whipsaw is the story. Bulls see a proven online model extending into a far larger market. Bears see a used-car retailer wandering into the lowest-margin corner of auto retail while its stock still trades at a steep premium to every traditional dealer. The question neither side can answer yet: does selling new cars make Carvana more valuable, or just more complicated?

What Carvana Built in Dallas

The Dallas store is not a dealership in any normal sense. Every purchase, new or used, is completed online. The showroom is a self-service test drive center built around a ten-foot LED cube that shoppers control from their phones. Outside sits a “playground” where Stellantis models are parked for walk-arounds and test drives. No-haggle pricing and financing appear after a soft credit pull, the same flow Carvana uses for used cars.

The scale is small on purpose. New vehicles account for roughly 2,200 of the 67,000 cars Carvana lists, so this is a market test, not a pivot. Carvana is not trying to become a dealer. It is testing whether its software and logistics can absorb new cars without the dealer cost structure.

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Why the Stock Is Still Down

The expansion lands during a rough stretch. CVNA is down more than 20% year to date and sits below its 52-week high of $97.38. CarMax rattled the whole group in mid-June with commentary that costs remain elevated. So the news hit nervous ground, which is why the reaction was so violent in both directions.

Strip out the noise, and the fundamentals are strong. First-quarter 2026 revenue rose 52% to $6.432 billion, retail units hit a record 187,393 (up 40%, the sixth straight quarter of at least 40% growth), and adjusted EBITDA reached a record $672 million at a 10.4% margin. On the Q1 call, CEO Ernie Garcia tied it all to one goal: “selling 3 million cars per year at 13.5% adjusted EBITDA margin by 2030 to 2035.” That target is the bull case, and new cars are one more lane to reach it.

The Cost Story Under the Headlines

Garcia opened the Q1 call on a problem, not a record. A fourth-quarter stumble in reconditioning, the work of inspecting and refurbishing used cars before resale, pushed per-unit costs higher. The team rebuilt its tools, and by April the network was “operating just shy of our all-time best in labor efficiency.” That recovery is why Q1 reframed the Q4 miss as operational, not structural, and it is the same muscle Carvana now points at new cars.

That distinction is the whole debate. If the recon fix holds and fixed-cost leverage continues, the path to 13.5% margins is arithmetic. If those costs signaled a margin ceiling, the new-car detour looks like a distraction from a business that has not yet proven its profitability is durable.

A Premium That Has to Be Earned

Carvana’s valuation premium is real. On forward EV/EBITDA, which measures enterprise value against expected operating earnings, CVNA trades near 16.1x. The traditional dealers sit far lower: Penske (PAG) at 14.0x, Lithia (LAD) at 13.6x, and AutoNation (AN) at 10.3x, with the peer mean near 11.5x. The premium makes sense only if Carvana keeps growing units around 40% while dealers grow in the low single digits. Investors are paying for the growth, not in spite of it.

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TIKR Advanced Model Analysis

• Current Price: $66.56
• Target Price (Mid): ~$147
• Potential Total Return: ~121%
• Annualized IRR:~19% / year

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Using the mid case realized at 12/31/30, the model targets around $147 at roughly 19% per year. The two revenue drivers are continued unit growth toward the 3-million-car goal and rising revenue per unit as new reconditioning capacity comes online, with mid-case revenue growth in the mid-teens. The margin driver is fixed-cost leverage as overhead grows more slowly than units, lifting net margin toward roughly 7%. The primary risk is the used-car cycle: a weaker job market or tighter auto credit would slow units and pressure the loan book at once.

The upside: if Carvana sustains 40% unit growth and converts it to 13.5% EBITDA margins, the premium is earned, and 19% a year looks conservative. The downside: if reconditioning costs reflect a structural ceiling, the multiple compresses fast, and the new-car experiment becomes a costly distraction. One note on the horizon, the model’s longer 2034 view shows around $213 at a roughly 15% IRR, so the 2030 figures above are the nearer, more conservative read.

Conclusion

Watch retail gross profit per unit when Carvana reports Q2 2026 in late July. Management guided to sequential record units and EBITDA, so anything short of a fresh all-time EBITDA high would undercut the “Q4 was a one-off” story that has carried the stock since April. Good looks like GPU holding or rising with units still up around 40%. Bad looks like GPU slipping again while management points back to costs. The new-car push will not move the financials in a single quarter, so judge unit economics first. If Q2 confirms the recon fix held, the gap between $66.56 and the Street’s $92, let alone the model’s $147, becomes the story.

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Should You Invest in Carvana?

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!