CNBC’s Jim Cramer on Tuesday described why he likes online used car dealer Carvana, telling investors they can start a small position and wait for a pullback to buy more.
“I like Carvana for the long-haul because I’m a true believer, but that doesn’t mean the stock will charge endlessly higher without taking some detours,” he said. “In fact, I hope it gives you a big pullback, because that will let you get back into the stock at a very nice discount.”
Cramer said the stock “tends to be a real wild trader,” but it’s been on an upswing over the past several years, performing especially well in recent months. Carvana has not yet surpassed its 2021 peak, but Cramer said shares are approaching those levels, and it’s only a matter of time before the stock starts hitting new all-time highs. Carvana managed to hit a new 52-week high during Tuesday’s session but closed down a little over 3%.
Carvana’s most recent earnings report comfortably topped Wall Street’s expectations, and Cramer said he thinks the retailer is on the right track. The company doesn’t usually provide detailed guidance, but Cramer said he was impressed with its new long-term financial targets and management’s assertion that it expects a “sequential increase in both retail units sold and adjusted EBITDA.”
Cramer said he thinks Carvana’s sales methodology is very convenient — it allows customers to buy, sell, finance and trade cars on an online platform. He said the auto sales space is very fragmented, so Carvana has more room to take market share. The company is also “riding a couple of other waves,” he continued, saying investors who believe that interest rate cuts are imminent see the stock favorably, as lower rates make it easier to finance a car. Carvana’s used cars start to look more enticing as President Donald Trump’s new tariffs hit foreign automakers, he added.
But the stock could pull back from here, Cramer said, suggesting that it’s “approaching overbought territory.”
“Carvana’s built a best-in-class business model, and management’s on track to deliver both strong growth and rising profitability,” he said. “If you don’t own it already, you do have my blessing to put on a small position here. Then you got to wait for the opportunity to buy some more on weakness only.”
Carvana did not immediately respond to request for comment.
