Key Takeaways:
Carvana shares fell 11% on July 30 after full-year adjusted EBITDA guidance of $2.7 billion to $3 billion missed the roughly $3 billion consensus, deepening a 30% year-to-date decline that stands in stark contrast to CarMax's 51% gain.
"Q2 2026 was Carvana's tenth consecutive quarter of industry-leading growth and profitability," CEO Ernie Garcia said in a statement. "At Carvana's current run-rate scale of almost 800,000 retail units and over $2 billion net income, we are still just 1.5% of the U.S. automotive market."
Revenue hit a record $7.376 billion in the second quarter, up 52% year over year and above the $6.86 billion consensus. Adjusted EPS of $0.42 topped the $0.38 estimate, and adjusted EBITDA of $769 million was also a record, though it barely exceeded the $766.2 million average estimate. Retail units sold reached a record 197,325, up 38% from a year earlier. Total gross profit per unit slipped $412 year over year to $7,014, though it rose $231 from the first quarter.
The guidance disappointment widened a striking performance gap between the two used-car retailers. CarMax shares have surged 51% in 2026 on the strength of its own turnaround under new CEO Keith Barr, who started March 16. CarMax reported Q1 fiscal 2027 EPS of $1.31 versus $0.94 expected on revenue of $8.01 billion and raised its SG&A exit-rate savings target to $200 million by the end of fiscal 2027. JPMorgan upgraded CarMax to Neutral from Underweight with a $60 price target, and Barclays lifted its rating to Equal Weight from Underweight with a $61 target.
The valuation picture complicates any reflex to sell one and buy the other. Carvana trades at 31 times trailing earnings, a multiple that looks reasonable for a company compounding revenue above 50% annually. CarMax carries a higher 36 times multiple on a business that is still stabilizing. Insider activity sends opposing signals: Carvana has logged 67 recent insider transactions with net selling, while CarMax shows 18 transactions with net buying.
Wall Street largely framed Carvana's near-term EBITDA pressure as temporary. Morgan Stanley cut its price target to $90 from $102 while keeping an Overweight rating, and Wells Fargo lowered its target to $80 from $85, also Overweight. Of 24 analysts covering Carvana, 16 rate it a Buy, seven a Hold and one a Sell. CarMax's mean price target of about $49.64 sits below its current share price, reflecting the extent of the rally.
The guidance reset means Carvana's next catalyst is proving it can sustain margin expansion while maintaining growth. CarMax's fiscal Q2 results are due Sept. 29, followed by Barr's first Strategic Update in late fall. One of these year-to-date gaps typically closes, and the next data points are already on the calendar.
This article is for informational purposes only and does not constitute investment advice.
