Used-car prices jumped in April to the highest in 18 months, a trend that's fueling shares of Carvana and some other used-car dealers.
Carvana stock is near new highs following a bullish earnings report Wednesday. Several other auto retail stocks such as AutoNation and Group 1 Automotive are in rising price trends. Those shares continued to rise Monday, even as a tariff advantage for used cars appeared to fade.
Wholesale used-vehicle prices rose 4.9% in April from the year-ago level, as measured by the Manheim Used Vehicle Value Index. It was also 2.7% above March levels and the highest reading for the index since October 2023.
"The 'spring bounce' normally ends the second week of April, but this year, wholesale appreciation trends continued for the entire month and were much stronger than we typically observe," Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive, said in the Manheim report Wednesday. "We expected to see strong price appreciation in response to the tariffs, and that's exactly what came."
Looking into the second half of the year, however, the auto market may slow, Robb added. Buyers boosted demand in March and April as they tried to get ahead of expected higher prices due to tariffs. April appreciation trends were much stronger than usual, and owed mainly to President Donald Trump's new tariffs on autos and other imports. The U.S. and China agreed to slash tariffs, though talks continue.
Carvana Stock Rallies On Earnings
Carvana stock surged more than 10% Thursday and briefly touched the 292.84 buy point of a cup-without-handle base. Shares Monday afternoon were 6% below that entry, according to IBD MarketSurge, but rose 2.6% investors cheered the U.S.-China deal to slash tariffs.
Carvana beat first-quarter profit and sales expectations. It forecast record highs for current-quarter unit sales and adjusted EBITDA. It announced a target of selling 3 million retail vehicles per year at an adjusted EBITDA margin of 13.5% within 5-10 years. The company sold 416,348 retail vehicles last year.
In the conference call with analysts, CEO Ernie Garcia saw limited impact from tariffs.
"I think when tariffs were first announced, we saw a small pull forward of demand and we reacted accordingly. ... So we pulled some levers to try to keep sales on our plan. And despite that little increase in demand and then we saw probably a little bit of a trough thereafter and it feels like it's stabilized since," Garcia said. "And I think overall our expectations remain the same. So I don't think we have too much that's interesting there, but that's how we've been reacting."
On Thursday, Garcia told CNBC he expects tariffs to impact the used-car business less than companies that sell new cars.
Carvana, an online platform for buying and selling cars, is up nearly 35% so far this year. That's the best performance among U.S. companies in IBD's retail and wholesale industry group. The stock also has the best Composite Rating of 21 stocks in the group.
Not Just Carvana Stock That's Hot
Openlane shares broke out above the 22.47 buy point of a cup base Monday in active trading. The stock had jumped 13.5% Thursday after the used vehicle auction and salvage company reported a 62% increase in earnings per share and 10.5% rise in sales year over year.
The stock, which has a 92 Composite Rating, faded after an opening rally but remained close to the entry.
Group 1 Automotive is forming a cup base and is 9% off new highs after shares jumped 3% Monday. The company is more diversified that its peers, offering new and used cars, auto body repair and financing services. It also has operations in the U.K. Its Composite Rating is 91.
AutoNation, which sells new and used cars through its dealership network, is forming a cup base with a 198.50 buy point. It has a 75 Composite Rating. Group 1 is also basing, rising off its 50-day and 200-day moving averages.
Group 1 and AutoNation stock rose solidly Monday, after clearing early entries last week.
America's Car-Mart, which operates more than 150 used-car dealerships, gapped above its 200-day line Monday as shares rallied nearly 8%.
But CarMax and some other used-car sellers have struggled. CarMax stock is down nearly 16% year to date and below its 50-day and 200-day moving averages, basically rangebound for nearly two years.
That's despite that earnings growth accelerated 13%, 55% and 81% the past three reported quarters.
CarMax removed its outlook at the April 10 earnings report, citing economic uncertainty. RBC Capital, Needham and other analysts cut their price targets on the stock but kept bullish ratings.
Shares rose more than 4% Monday morning, but remain below the 50-day moving average.
William Blair analyst Sharon Zackfia agrees tariffs are more likely to hurt new-car sellers more, as higher costs are passed on to consumers, she said in a note to clients April 29, prior to Monday's tariff breakthrough. That would likely create a tailwind for CarMax, as the gap between new and used car prices widens and the potential for a surge in demand that ultimately drives up used-car prices. Zackfia has an outperform rating on CarMax.
