13 Best Car Stocks to Buy in 2025

2. Carvana Co. (NYSE:CVNA)

Number of Hedge Fund Holders: 84

Carvana Co. (NYSE:CVNA) is a used car buying and selling online marketplace. The company generates revenue through used vehicle sales, wholesale vehicle sales, and other sales and revenues. It claims that it has a strong balance sheet and that its distinctive focus on online sales has improved its top and bottom lines and allowed it to stand out from its rivals. The stock jumped by more than 30% YTD, making it one of the Best Auto Stocks.

Carvana Co. (NYSE:CVNA) had an excellent year, generating adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margins of over 11%, the highest in this industry, and recovering revenue growth to over 20%. The firm is the most profitable and quickly growing used car seller, which makes it a remarkable business. It only has a 1% market share despite these extraordinary accomplishments. The company’s substantial growth potential can be seen by the fact that the market leader has over 10% of the market share in nearly all other retail categories.

Piper Sandler analyst Alexander Potter boosted the firm’s price objective to $230 from $225 and maintained an Overweight rating on the stock after reviewing multiple used vehicle datasets, which the firm updated to match Q1 results. March saw a double-digit increase in used car sales year over year, most likely as a result of trade-ins and a surge in pre-tariff automobile purchases. Piper believes that the enthusiasm has likely persisted in April, but the number of new and used cars on the market is quickly declining. It believes that price rises will probably happen soon. Even if increased prices lead to fewer market-wide transactions, the company believes Carvana Co. (NYSE:CVNA) will continue to expand unit sales as long as auto financing is available.

Patient Capital Opportunity Equity Strategy stated the following regarding Carvana Co. (NYSE:CVNA) in its Q1 2025 investor letter:

“This quarter we entered five new positions, while exiting three. We began building a position in Carvana Co. (NYSE:CVNA) in the quarter. Carvana is the world’s largest online-only used car retailer. The company has spent the last decade plus building a vertically integrated platform that has captured 1% of a massive $1T total addressable market (TAM). Even with a focus on growth, the company has achieved industry leading EBITDA margins by leveraging their fixed cost base as they scale. Despite innovation in other industries, the used car market is still antiquated. Supply is fragmented, pricing lacks transparency, and the customer experience is generally poor. Carvana addresses these pain points through no-negotiation pricing and rapid delivery, eliminating geographical constraints for consumers. As the company continues enhancing the customer experience, we believe they are set to continue to win market share. Given the enormous TAM, even small incremental share gains can make a big difference. Following their financing issues in 2022-2023, the company has emerged with greater cost discipline and margin improvement. We believe this strengthened operational approach will continue serving them well, supporting both top and bottom-line growth going forward.”