We recently compiled a list of the 13 Best Car Stocks to Buy in 2025. In this article, we are going to take a look at where Carvana Co. (NYSE:CVNA) stands against the other best car stocks.
Car stocks are the stock holdings of businesses engaged in the automotive market, such as those that produce automobiles, auto parts, or industry-related services.
According to Reuters, U.S. new car sales in 2024 grew significantly from their pandemic lows due to increased production, restocked inventory, and growing demand for hybrid cars. As per Wards Intelligence, new car sales in the United States hit 15.9 million in 2024, up 2.2% from 2023 and the highest since 2019.
In 2025, S&P Global forecasts that global sales of new light vehicles, or passenger cars and trucks, are projected to rise 1.7% to 89.6 million units. The overall reduction of 2025 automotive estimates reflects anticipated changes in US policy following the election. There will be significant impacts on the demand for vehicles as a result, particularly on interest rates, trade flows, sourcing, and the rates of BEV adoption.
Colin Couchman, executive director of global light vehicle forecasting for S&P Global Mobility, commented:
“2025 is shaping up to be ultra-challenging for the auto industry, as key regional demand factors limit demand potential and the new US administration adds fresh uncertainty from day one,” “A key concern is how ‘natural’ EV demand fares as governments rethink policy support, especially incentives and subsidies, industrial policy, tariffs, and fast evolving OEM target setting.”
Chris Hopson, principal analyst at S&P Global Mobility, recently stated that consumers who are considering buying a new car are hurrying to dealers before possible price implications become apparent. The sales spikes in March and April might open the way for future volatility. In the next three months, automakers will face new, tariffed inventory and production levels in addition to unstable economic conditions.
In response to industry criticism, President Trump recently introduced a two-year relief provision linked to domestic sales and manufacturing volume, which loosened the recently imposed 25% tariffs on cars and parts. Now, automakers with U.S. factories can deduct import taxes on parts, starting at 3.75% of the suggested retail price of a car in the first year, and then 2.5% in the second year. Vehicles with 85% U.S., Canadian, or Mexican parts are exempt from tariffs, which will rise to 90% by next year. Furthermore, the administration exempted these companies from overlapping taxes on Canadian and Mexican commodities, steel, and aluminum. After industry groups warned that the duties, which went into effect in March for automobiles and on May 3 for parts, would increase auto prices, lower sales, and negatively impact service costs, the move was made.
GM chief executive Mary Barra stated:
“We’re grateful to President Trump for his support of the US automotive industry and the millions of Americans who depend on us,”
Nonetheless, there will be plenty of fireworks as leading businesses compete for market share because the automotive industry is still evolving. According to Dentons, the automotive industry will need to be adaptable, creative, and flexible in 2025 as it manages changing consumer demands, regulatory changes, and economic challenges. In a market that is competitive and evolving quickly, Original Equipment Manufacturers can position themselves for success by taking advantage of developments in manufacturing technologies, software-defined vehicles, and electric vehicles.
A customer buying a used car with the help of a finance specialist.
Methodology
For this article, we sifted through the online rankings to form an initial list of the 20 Car Stocks. From the resultant dataset, we chose 13 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 1,009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s YoY revenue growth as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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.”
Overall, CVNA ranks 2nd on our list of the best car stocks to buy in 2025. While we acknowledge the potential of CVNA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CVNA but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.