Despite a 7% year-to-date decline in Carvana shares, Morgan Stanley maintains its $90 price target, citing robust sales growth and disciplined capital spending even as profit per vehicle slips and rivals gain ground.
Carvana's stock has declined 7% in 2026, even as the company reported record quarterly revenue and exceeded Wall Street's sales forecasts. This contrast between Carvana's operational momentum and its underperforming share price has intensified debate among analysts. Morgan Stanley has reiterated its bullish $90 twelve-month price target, representing a 25% potential upside from current levels near $74.
Carvana's Q2 2026 revenue surged 52.4% year over year, marking one of the company's strongest quarters on record.
Growth momentum faces margin pressure
Retail unit sales increased 38% in the second quarter, outpacing both Morgan Stanley's and broader market projections. Third-party trackers indicate this growth rate is holding in the high 30% range for the second half of the year. Morgan Stanley asserts that Carvana's growth is currently constrained by inventory supply rather than demand, and anticipates additional sales capacity as the company expands its reconditioning operations. Zacks and Reuters have highlighted Carvana's performance as notable within a volatile used-car sector.
However, gross profit per vehicle declined nearly 6% last quarter, and Morgan Stanley expects continued volatility in this metric as financing margins and interest rates fluctuate. The analysts project profit per car to remain flat through 2030, making future earnings growth dependent on reducing overhead and improving operational efficiency. Despite the strong quarter, Carvana shares have traded around $73.48-$74, leaving the stock flat to down for the year, according to MarketBeat and other sources.
Capital discipline and expansion strategy
Broader analyst sentiment after Carvana's Q2 2026 earnings remained positive, with a compiled consensus showing a 'Moderate Buy' rating and an average target price of around $84.14, though this is lower than Morgan Stanley's $90 target.
Morgan Stanley also outlines a long-term scenario in which Carvana leverages its logistics and software to manage autonomous vehicle fleets, though this remains speculative. In the near term, the focus is on reducing more than $900 in selling, general, and administrative expenses per retail unit by 2030. In early September 2026, Carvana's investor relations page highlighted expanded inspection and reconditioning at ADESA Brasher's, underscoring ongoing operational improvements.
Competitive threats and market risks
Carvana's profit per car remains sensitive to changes in financing costs and used-car pricing. A weaker labor market or tighter lending standards could slow sales, while competitors such as CarMax have surged over 50% this year, regaining market share. Rising costs or further declines in profit per vehicle could quickly erode Carvana's margin for error.
Nevertheless, Carvana's web traffic reached a record 41.6 million visits in July, up 62% year over year, and its disciplined capital spending leaves room for future shareholder payouts. Morgan Stanley's guidance to long-term investors is clear: volatility may persist around earnings, and meaningful returns could take time. For those considering new positions, waiting for the next earnings report-date still pending-may provide a clearer view on profit per car stabilization.
The S&P 500 has gained over 12% year to date, while the used-car market remains turbulent amid shifting consumer demand and elevated interest rates. Recent Zacks analysis notes that even experienced investors are reassessing cyclical sector exposure as market leadership rotates.
Carvana's future will ultimately depend on its ability to translate rapid sales growth into sustainable profitability despite thin margins and unpredictable financing conditions. While Morgan Stanley's conviction is notable, achieving cost targets and maintaining resilience against competitive pressures will determine whether this optimism is justified. For now, Carvana remains a high-volatility investment-suitable only for investors prepared to withstand sharp swings and closely monitor profit per vehicle, the metric most likely to indicate whether growth is delivering lasting value.
Gross profit per vehicle is a critical measure for auto retailers like Carvana. It reflects the difference between the sale price and the direct costs to acquire, recondition, and sell each car, before overhead. While strong sales growth can increase total revenue, declining profit per car can undermine overall profitability-especially if fixed costs are high or financing terms worsen. Investors should monitor this figure closely, as it often signals whether a company's expansion is sustainable or eroding margins.
