Since the close of trading last Friday, shares of the online used-car retailer Carvana (CVNA -5.74%) had surged roughly 11.4%, as of 10:26 a.m. ET today. The company reported strong second-quarter earnings this week and received several price target increases from Wall Street analysts.
A boost from auto tariffs
In the second quarter of 2025, Carvana reported $308 million of net income on total revenue of $4.8 billion. Profits are up more than fivefold on a year-over-year basis, while revenue surged 42%. During the quarter, Carvana sold an all-time high 143,280 retail units.
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"In April, we saw strong demand following the initial announcement of auto tariffs in late March, resulting in higher-than-normal April Retail GPU [gross profit per unit]. For the full quarter, we estimate that this transitory benefit positively impacted Q2 Retail GPU by ~$100," management said in its quarterly letter to shareholders.
Following earnings, Bank of America analyst Michael McGovern reiterated his buy rating on the stock, assigning a $425 price target, which implies about 15% upside from current levels. "We think CVNA is also benefiting from a mix-shift toward Used, as cost conscious customers seek value," McGovern wrote in the note.
Interesting valuation dynamics
Carvana has been an extremely volatile stock to own over the past few years. The stock traded to less than $5 per share in 2023 and now trades over $370. The stock is now valued at over 65 times forward earnings but just 2.7 times forward revenue.
Given how the used-car business can be heavily impacted by the economy, and given how the economic trajectory is still quite uncertain, I'd stay more cautious on the name.
