According to CNBC, Bank of America has reiterated its buy rating on Carvana and hiked its price objective to $455 from $385, signaling a potential 13.8% upside from last Friday’s close. Analyst Michael McGovern pointed directly to the S&P Dow Jones Indices’ announcement that Carvana will be officially added to the S&P 500 before the market opens on December 22. The bank had identified this inclusion as a top catalyst back in June. McGovern noted that Carvana’s fundamentals remain strong, with stable consumer demand and share gains against CarMax. He now expects the company to maintain a 20% compound annual unit growth rate from 2027 to 2032, up from a prior estimate of 18.5%. Carvana’s stock has surged 97% year-to-date.
The Index Effect and Credibility Boost
Here’s the thing about getting added to the S&P 500: it’s not just a ceremonial pat on the back. It forces a massive, automatic buy order from every index fund and ETF that tracks the benchmark. That’s a ton of forced buying pressure that can provide a real, technical lift to the stock price. But maybe more importantly for Carvana, it’s a huge credibility marker. This is a company that was left for dead by many investors not too long ago, flirting with bankruptcy. Now? It’s being welcomed into the club of the 500 most important U.S. companies. That changes the narrative completely and likely opens doors to lower capital costs, which McGovern also highlighted. It signals that the wild ride might be over, and a new, more stable phase is beginning.
Fundamentals and the CarMax Rivalry
So beyond the index pop, what’s the actual business case? Bank of America’s analyst is making some bold calls on the fundamentals. The idea that Carvana could surpass CarMax in quarterly units sold by 2026 is a huge statement. It frames this as a direct market-share battle that Carvana is winning, partly by being more aggressive on price and financing (those “fundamental gains” returned to customers). The raised long-term growth assumption to 20% is another sign of confidence. Basically, the thesis is that the online model isn’t just a niche anymore—it’s the growth engine taking share from the traditional lot-based giants. The recent worry about a Q4 slowdown seems to have been eased by positive data, convincing BofA that demand is holding up just fine.
A Stunning Comeback Story
Look, let’s not gloss over the sheer scale of this turnaround. A 97% stock gain in a year is staggering for any company, let alone one with Carvana’s recent history. It shows how quickly sentiment can shift when execution improves and debt fears subside. The S&P 500 inclusion is the capstone on that recovery arc. But now the question changes. It’s no longer “will they survive?” It’s “how big can they grow?” The new price target and long-term estimates suggest Bank of America thinks they can grow very big indeed. Of course, this all hinges on management executing that 20% growth for years on end and the used car market cooperating. That’s a tall order. But for now, the market is clearly buying the story—literally and figuratively.
