Bank of America said Carvana’s earnings are likely to slow following the dizzying rise in used car stocks in recent years, primarily due to a combination of macroeconomic headwinds. The bank downgraded Carvana from “buy” to “neutral” and lowered its price target to $360 from $400, still suggesting an upside of nearly 15% from Thursday’s closing price. “Recent macro and industry trends make near-term risk and return appear more balanced,” Bank of America analyst Michael McGovern said in a note to clients on Monday. “With the recent oil crisis likely to put pressure on already marginal low- and middle-income consumers, and with two-year interest rates moving in the opposite direction, we believe the risk-reward profile is more balanced now than heading into 2026, despite management’s strong execution and still-strong growth.” Carvana’s stock price nearly quadrupled in 2024 as the used-car company posted improved quarterly profits, boosted by a series of cost-cutting measures. That growth continued through much of last year, but Carvana stock plunged 26% in 2026 as the fallout from the Iran war threatened to hit consumers’ wallets, McGovern said. The analyst said deteriorating macroeconomic conditions during the Iran war could reduce discretionary spending, hurting Carvana’s and its competitors’ earnings. CVNA YTD Mountain Carvana Year-to-date Inventory U.S. gasoline prices soared more than 30% following a series of U.S. military attacks on Iran in late February. “Higher gas prices could pose some risk to discretionary spending in the car category, particularly for the younger demographic,” McGovern said. “For example, Gen Z spending on gasoline accounts for nearly 10% of all Gen Z discretionary spending, nearly double the share of older adults.” As consumers appear to be tightening their wallets, Carvana aims to capture a larger share of the used car market by adopting more competitive financing rates. But Bank of America said the recent rise in two-year bond yields could compress excess spreads, potentially undermining those efforts. “Despite strong tax refund payments, we are somewhat less optimistic that year-on-year sales growth will accelerate in the near term,” McGovern said. Separately, Carvana is already facing increased competition in auto loans, threatening its gross profit per vehicle. Late last year, CarMax said it would cut profit margins on retail used goods in a bid to stand out from rivals. Bank of America’s call runs counter to Wall Street consensus. Of the 26 analysts covering Carvana, just seven own the stock, according to LSEG. The stock is down nearly 26% in 2026, marking a reversal from gains over the past few years. However, the stock price is up 93% in the past 12 months.
