Should I Buy Carvana (CVNA)? Finance YouTuber Analysis

The analyst states Carvana is 'in the too hard pile' for investment, despite its recovery and return to profitability. The concern lies with its high valuation (forward P/E 93, EV/Sales over 2) and the competitive used car market, which could limit future growth and margin expansion. The analyst is not buying it going into 2025.

“definitely not one that I'm buying going into 2025 because I think that growth story and the margin expansion story could come to an end especially as the used car market becomes much more competitive and those prices potentially come under pressure as new vehicle values come down in 2024 and 2025.” — ▶ 41:50

The analyst advises avoiding Carvana due to its current valuation, trading at 78 times earnings, which he believes is overly optimistic given the potential for declining profitability. He argues that the high gross profit per unit is unsustainable due to increasing competition and potential reductions in financing gains and add-on sales. The company also carries a significant debt load of $5.3 billion, which adds to the risk profile.

“definitely not a stock that I'm buying right now and that's in large part based on valuation and the durability of the business model” — ▶ 10:00