Carvana (NYSE:CVNA) is navigating renewed scrutiny over its subprime financing amid broader market jitters, but the online used-car retailer appears well-positioned to weather potential losses, with rising used-car prices and resilient securitization structures keeping its growth trajectory intact.
BTIG analysts led by Marvin Fong maintained their Buy rating and $450 price forecast, maintaining Carvana as a top pick for the second half of 2025.
The recent bankruptcy of subprime lender Tricolor, CarMax (NYSE: KMX) adding more reserves to its loan portfolio, and general macro concerns surrounding the auto finance market have brought renewed interest into Carvana’s financing exposure.
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BTIG said investors have been closely examining Carvana’s auto loan performance, focusing on delinquency and cumulative net loss rates.
The firm conducted a deeper analysis of how Carvana’s loan underwriting standards and asset-backed security structures have evolved, as well as the potential financial impact, if any, of its subprime loan pools were to experience losses.
The firm said that across Carvana’s 14 subprime asset-backed-securities (ABS) issuances since 2019, no investment-grade tranches appear at risk of impairment, even where cumulative net losses exceed initial projections by over 500 basis points. BTIG believes these tranches remain well-insulated from credit stress.
Responding to bearish analysis indicating that loss coverage for Class E notes is below forecasts of future net losses, BTIG said these views overlook that future excess spread income can provide additional credit enhancement to the securitizations, preventing loss of principal. The firm also noted that used car prices started rising after two years of declines, which should help improve recovery rates.
BTIG outlined three “even if” stress cases that still imply resilience. Even if equity tranches experience losses, their internal rate of return could remain positive.
Even if impairments occur, market access is likely intact, as issuers like SoFi Technologies (NASDAQ: SOFI) and Upstart Holdings (NASDAQ:UPST) have continued securitizations despite similar credit events.
And even if Carvana increases credit enhancement, the estimated 13% hit to adjusted EBITDA would still leave margins roughly double those of traditional dealers.
BTIG’s $450 price forecast, based on a 28x fiscal 2027 adjusted EBITDA multiple, reflects expectations for sustained margin leadership and share gains supported by tariffs that raise new-car prices and bolster used-vehicle demand.
The firm said Carvana’s vertically integrated model enables both growth and profitability despite only a 1% share of the used car market. Tariff-driven pricing benefits and the company’s expansion into franchise and adjacent markets could further extend its reach.
BTIG projects strong top-line and earnings growth for Carvana over the next two years. The firm estimates fiscal year 2025 revenue at $18.97 billion, up sharply from $13.67 billion in fiscal year 2024. For fiscal year 2026, revenue is expected to rise further to $24.03 billion.
On profitability, BTIG forecasts adjusted EBITDA of $2.19 billion in fiscal year 2025, nearly 60% higher than fiscal year 2024 levels, and $2.92 billion in fiscal year 2026.
Price Action: CVNA shares were trading lower by 6.37% to $337.31 at last check Friday.
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