Is Carvana's Recent Pullback a Strategic Entry Point for Long-Term Investors?

The recent volatility in Carvana's stock price has sparked a critical debate among investors: Is this pullback a buying opportunity or a warning sign? For value-driven growth investors, the answer may lie in the latest analyst upgrades, revised price targets, and long-term sales forecasts from Wedbush, which paint a compelling case for Carvana's potential to outperform in the evolving used-car market.

Wedbush's Upgrade and Revised Price Target: A Signal of Confidence

Wedbush Securities has upgraded Carvana to "Outperform" from "Neutral," a move that underscores its conviction that the stock's recent decline is overdone and represents a strategic entry point for investors according to reports. The firm has also raised its 12-month price target from $380 to $400, implying a potential 29% upside from Carvana's recent closing price. This adjustment reflects Wedbush's belief in Carvana's accelerating momentum in the used-car sector, particularly as it gains ground on its primary competitor, CarMax.

The revised price target is not merely speculative. Wedbush's analysts point to Carvana's operational improvements and its trajectory to surpass CarMax in unit vehicle volume by late 2026. This forecast is bolstered by Carvana's consistent earnings performance-six consecutive quarters of beating expectations-and its ability to maintain EBITDA margins more than double those of CarMax and traditional franchise dealers.

2026–2033 Sales Forecasts: A Roadmap to Dominance

Wedbush's optimism is further grounded in its bullish long-term projections. The firm anticipates that Carvana could achieve 3 million annual retail unit sales by 2033 according to analysis. This trajectory aligns with broader industry trends, as the used-car market continues to shift toward digital-first platforms that prioritize convenience, transparency, and scalability.

Carvana's competitive edge lies in its "competitive moat," as described by Morgan Stanley analysts. The company's digital infrastructure, coupled with its ability to command higher average selling prices and lower inventory costs, positions it to outpace rivals like CarMax, which has struggled with declining profits and sales. CarMax's recent guidance-anticipating an 8% to 12% drop in comparable store used unit sales year-over-year-further highlights the widening gap between the two players.

Carvana vs. CarMax: A Tale of Two Strategies

The contrast between Carvana and CarMax is stark. While Carvana has leveraged its digital platform to streamline the car-buying process, CarMax has been forced to pivot with an "omni-channel" strategy aimed at blending online and in-store experiences according to Morgan Stanley analysts. However, analysts remain skeptical about CarMax's ability to regain market share, particularly as it grapples with a 45% year-to-date drop in share value compared to Carvana's 85% gain according to Morgan Stanley.

Carvana's revenue growth-projected to compound at 25% annually through 2030-also dwarfs CarMax's stagnation according to Morgan Stanley analysis. This divergence is not just a function of operational efficiency but also a reflection of investor sentiment. Carvana's stock now trades at a discount to its intrinsic value, given its superior growth metrics and margin expansion, making it an attractive proposition for long-term investors.

Risk/Reward Profile: Why the Pullback Matters

The recent pullback in Carvana's shares, while unsettling for short-term traders, creates a favorable risk/reward profile for patient investors. Wedbush analysts argue that the stock's current valuation fails to fully account for its long-term potential, particularly as it scales toward 3 million unit sales by 2033. At the same time, CarMax's struggles-marked by declining average used-car prices and a 20% selloff in its stock-underscore the risks of underestimating the pace of digital disruption in the automotive sector.

For value-driven growth investors, the key question is whether Carvana can sustain its operational momentum while expanding its market share. The evidence suggests it can. With a digital-first model that reduces friction in the car-buying process and a balance sheet that supports aggressive growth, Carvana is well-positioned to capitalize on its current momentum.

Conclusion: A Strategic Entry Point

In the end, the decision to invest in Carvana hinges on a simple premise: Is the company's long-term potential being undervalued by short-term volatility? Wedbush's upgraded rating and revised price target, combined with Morgan Stanley's analysis of Carvana's competitive advantages, provide a strong affirmative. For investors willing to look beyond the noise, Carvana's recent pullback offers a rare opportunity to enter a high-growth stock at a discount-a classic value-driven growth play.

As the used-car market continues to evolve, Carvana's ability to innovate and scale will be critical. But one thing is clear: The company's trajectory, both financially and strategically, is pointing upward.