Carvana Stock Jumps as Company Joins S&P 500 After Major Turnaround

Carvana’s shares rose sharply on Monday after S&P Dow Jones Indices said the company would be added to the S&P 500 later this month, placing the online used-car retailer among some of the most widely tracked U.S. equities. The stock climbed about 11 per cent during intraday trading, crossing $445 before paring gains.

The company will join the benchmark on December 22, becoming part of the consumer discretionary grouping. Its inclusion reflects a sustained improvement in profitability and market value following a period when Carvana’s survival was openly questioned by lenders and investors.

In late 2022, the business was navigating liquidity concerns amid softening vehicle demand and a sharply higher cost of capital. Carvana’s shares briefly traded below $4, and a large proportion of its stock had been sold short as doubts mounted over its ability to refinance debt.

Since then, the retailer has cut operating expenses, renegotiated portions of its borrowings and redirected investments toward areas that more directly support its online-first model. These measures have helped lift profit per vehicle sold and allowed the company to generate positive earnings on an annual basis for the first time.

Carvana reported record revenue and record units sold in the third quarter. The company has maintained target ambitions of reaching annual sales of roughly 3mn vehicles over the next decade, implying a continuation of market share gains against traditional used-car chains.

Analysts at Bank of America, who raised their price target on Monday, said the company now meets index admission requirements relating to profit and liquidity. They highlighted continued gains against CarMax — the largest U.S. competitor — particularly in attracting customers willing to purchase and sell vehicles entirely through digital channels.

More than 30 per cent of Carvana buyers now complete purchases without direct staff interaction until the vehicle is collected or delivered, according to recent disclosures. Over 60 per cent of sellers use a similar online-only process.

Entry into the S&P 500 is likely to broaden the group of institutional owners. Index-tracking funds are required to purchase the stock, and Carvana’s presence in passive investment products can improve share turnover and reduce reliance on short-term speculative trading.

The move also places the business under closer attention from fund managers who evaluate corporate governance, leverage and consistency of profitability more intensely once companies enter major benchmarks. Carvana ended last year with its first consolidated annual profit, but remains exposed to financing conditions and fluctuations in used-car affordability.

Analyst coverage has shifted markedly over the past two years. Eighteen firms now recommend buying the stock, compared with only a small number of bullish views during its downturn. Six firms advise holding the shares, and two continue to recommend selling.

Carvana’s chief executive, Ernie Garcia, has acknowledged the difficult period that preceded the recovery, characterising the past two years as a test of resilience for the business. The index addition underscores the scale of the rebound — though sustaining it will require continued financial discipline as growth ambitions expand.

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