‘Carvana’s Rally Is Due for a Pause,’ Says Five-Star Analyst

Carvana’s (CVNA) stock, which is up an impressive 187% over the past year, may be “due for a pause” after strongly outperforming other car retailers, according to five-star J.P. Morgan analyst Rajat Gupta. He warned that the company is now facing lower-than-expected gain-on-sale (GoS) margins based on recent auto loan disclosures. Indeed, one area of concern is Carvana’s 2025-P2 auto receivables trust, which is a pool of car loans that the company bundled and sold to investors.

According to Fitch, this trust has a lower-than-average FICO score of 701 compared to other “prime” auto loan deals, as well as a high share of long-term loans. In fact, 95.3% of the loans are over 61 months, while nearly 48% are over 72 months. As a result, this raises questions about the quality and risk of Carvana’s loans. In addition, he warned that Carvana’s second-quarter results could disappoint Wall Street for the first time in five quarters, with EBITDA potentially falling short of expectations.

This would be a big shift from the company’s strong first quarter, where it reported record retail sales, record profitability, and record net income margin. Although Gupta maintained an Overweight rating on Carvana stock, his more cautious tone is weighing on sentiment and likely caused Carvana shares to fall. With concerns about loan quality, compressed margins, and possible weaker Q2 results, investors are now watching closely to see whether Carvana can maintain its momentum going forward.

Is Carvana stock a Buy, Sell, or Hold?

Overall, analysts have a Moderate Buy consensus rating on CVNA stock based on 11 Buys, five Holds, and zero Sells assigned in the past three months, as indicated by the graphic above. Furthermore, the average CVNA price target of $323.93 per share implies 8% downside risk.

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