Carvana is a 'true disruptor,' but does it have room to grow market share?

By Claudia Assis

Migration to online buying favors the used-car retailer, UBS says

Carvana's market share of the used-car market could grow to 8% in a decade, UBS said.

Carvana Co. is a "true disruptor," with an online platform and customer experience that positions it to gain market share in the large but fragmented used-car market.

That's from UBS analyst Joseph Spak, who on Monday started covering Carvana's stock (CVNA) with a buy rating and a price target of $450, implying a 18% upside from Monday's share price.

Carvana is a combination auto retailer and internet-marketplace company and is likely to benefit from a growing familiarity with buying cars - which are most people's second-largest purchase, after a home - completely online, he said.

Spak estimated that Carvana captures about 1.5% of the used-vehicle sales market, including about 3% of the retail market. That share could grow to about 4% by 2030 and about 8% over the next 10 years, he said.

That's on the back of an ongoing migration to online car buying, which currently accounts for only 2% of used-vehicle sales, "as consumers get more comfortable with purchasing online," he said.

UBS also thinks the company has a "best-in-class" e-commerce platform, one that offers people a better experience and "often a better price," he said.

Shares of Carvana have gained about 86% this year, dwarfing the S&P 500 index's SPX advance of around 16% in the same period and contrasting with a loss of nearly 60% for CarMax Inc. (KMX), a well-known competitor that has physical stores as well as a growing online business.

Carvana has faced its share of trepidation, however, and it has new competitors as well, including Amazon.com Inc.'s (AMZN) Amazon Autos. Amazon Autos is more of a lead generator for dealerships, at least for now, as it brings people looking at cars online into their shops, and to a lesser degree is a transaction facilitator thanks to its order-processing capabilities.

Amazon has officially been in the business of selling new and used cars online since December 2024, when it launched Amazon Autos with Hyundai vehicles as part of a deal the two companies had cut a year earlier. This year, the tech giant has announced deals with Hertz Global Holdings Inc. (HTZ) and Ford Motor Co. (F).

Carvana struggled in late 2022 and part of 2023, beset by a cash crisis followed by a bankruptcy-dodging deal with bondholders, but since then has carved out a comfortable and lucrative space for itself.

Read also: Carvana survived a debt crunch. Can it survive Amazon?

-Claudia Assis

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12-01-25 1349ET