TheBadPlaceUS Top News and Analysis | Bank of America downgrades Carvana. Why the stock's recent dip isn't a buying opportunity
Bank of America downgraded Carvana to neutral from buy, citing macroeconomic headwinds and a more balanced risk/reward outlook. The bank lowered its price target to $360 from $400, which still implies nearly 15% upside from Thursday's close. Analyst Michael McGovern noted that recent oil shocks and rising 2-year yields are pressuring lower- and middle-income consumers, potentially dampening discretionary spending on used cars despite Carvana’s strong execution and elevated growth.
Carvana’s stock surged nearly fourfold in 2024 due to improved quarterly profits from cost-saving measures, but has since plunged 26% in 2026 amid fallout from the Iran war, which has driven U.S. gas prices up over 30%. McGovern warned that higher gas prices could disproportionately affect younger consumers, as Gen Z spends nearly 10% of discretionary income on fuel—double the share of older cohorts—threatening demand in the auto sector. Although Carvana is attempting to gain market share through competitive lending rates, rising 2-year yields may compress excess spreads and undermine those efforts.
Despite strong tax refund payouts, Bank of America is slightly less optimistic about near-term year-over-year unit growth acceleration. Carvana also faces increasing competition in auto lending, with rivals like CarMax lowering margins to gain ground, pressuring Carvana’s gross profit per unit. The downgrade contrasts with Wall Street consensus, where only 7 of 26 analysts hold a hold rating. While the stock is down 26% year-to-date, it remains up 93% over the past 12 months, reflecting its volatile trajectory amid shifting macroeconomic conditions.
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