Carvana Co (NYSE:CVNA), a leading e-commerce platform for buying and selling used cars, stock rose 1.22% (As on June 20, 11:28:27 AM UTC-4, Source: Google Finance) after the company upgrade Sell to Hold by Stephen Ayers. The analyst recognizes Carvana’s significant financial turnaround, with strong revenue growth, improved profitability, and positive free cash flow signaling business viability despite valuation concerns. “Carvana’s recent performance merits a rating upgrade from Sell to Hold. It has transitioned to profitability, and the levers are there for more growth and profitability for years to come. While its stock appears overpriced, even with optimistic assumptions, it is not to the extent that it feels ridiculous.”

Moreover, in Q1 2025, Carvana sold 133,898 retail units (+46% YoY) for total revenue of $4.232 billion (+38% YoY), both all-time quarterly records. This growth was paired with record Q1 profitability, including record Net Income of $373 million and Net Income margin of 8.8% and record Adjusted EBITDA of $488 million and Adjusted EBITDA margin of 11.5%. In the first quarter, the Operating income was ~80% of the Adjusted EBITDA. This compares favorably to the high-growth, e-commerce, and technology peers as a result of the more limited adjustments.

Meanwhile, the company’s business model is inherently simpler than the business models we compete against. It enjoys positive feedback from nationwide selection, brand, speed, and data, and it is more efficient and therefore more scalable today than it has ever been. Today, the company is selling 35% more cars per Carvana team member than the company were at the previous retail unit record, and there is significant room for improvement in that metric. The company already have real estate capacity for 3 million unit sales per year and are methodically unlocking that capacity with Megasites. These sites leverage the ADESA footprint to not only power growth but also improve efficiency and customer experience by getting cars and Carvana infrastructure closer to the customers

Looking toward the second quarter, Carvana expects a sequential increase in both retail units sold and Adjusted EBITDA, leading to all-time company records on both metrics. The company remains on track to deliver significant growth in both retail units sold and Adjusted EBITDA in FY 2025. After four consecutive quarters of over 30% retail unit growth paired with Adjusted EBITDA margins consistently within its long-term financial model range, the company announced its next management objective: to sell 3 million retail units per year at an Adjusted EBITDA margin of 13.5% within 5-10 years.