Carvana: A Remarkable Turnaround — But Still an Overvalued Stock

By Mickelberry Capital

It’s possible to admire a turnaround and question the price investors are paying for it.

Carvana is a perfect example of why separating business performance from stock valuation matters. The company has executed an impressive operational recovery under its current leadership, stabilizing a business that many believed was headed toward collapse.

That deserves recognition.

But admiration for management does not automatically justify today’s valuation.

At Mickelberry Capital, our role is not to cheer execution — it’s to assess whether the price reflects a realistic balance of risk and reward.

Giving Credit Where It’s Earned

Let’s be clear: Carvana’s leadership accomplished something difficult.

The company:

Reduced operating expenses materially
Improved unit economics
Stabilized liquidity during a hostile credit environment
Avoided a disorderly unwind when many expected one

From an operational standpoint, this was a strong comeback. Many companies in similar positions never recover.

Respecting that achievement is important — because ignoring it would weaken any serious analysis.

Why a Better Business Doesn’t Automatically Mean a Fairly Priced Stock

Here’s where discipline matters.

Carvana today is less broken — but it is not suddenly low-risk.

The stock price implies:

Sustained profitability
Favorable credit conditions
Stable used-car demand
Minimal dilution risk
Little margin for operational setbacks

That’s a long list of assumptions for a business that still operates in a highly cyclical, capital-intensive industry.

A turnaround reduces downside — it does not eliminate it.

The Debt Still Defines the Valuation

Carvana’s balance sheet remains the central issue.

Even after improvements:

The company carries substantial debt
Interest expense is meaningful
Refinancing risk has not disappeared
Equity value remains highly sensitive to credit markets

In valuation work, leverage magnifies outcomes — both good and bad.

Markets often celebrate survival as if it guarantees future dominance. History suggests otherwise.

Valuation Has Run Ahead of Fundamentals

Carvana’s stock has rallied aggressively, pricing in:

Continued margin expansion
Stable macro conditions
No major demand slowdown
Flawless execution

This is where valuation risk emerges.

Turnarounds tend to be overpriced in the early stages of success, as markets extrapolate short-term improvements far into the future.

At current levels, investors are paying for:

What went right
What might go right
And very little of what could still go wrong

That imbalance is what concerns us.

A Strong CEO Does Not Remove Industry Cyclicality

Carvana operates in used auto retail — a business exposed to:

Consumer credit conditions
Interest rates
Vehicle supply cycles
Economic slowdowns

No management team, regardless of skill, can fully insulate the business from those forces.

Great leadership improves odds.
It does not repeal economic reality.

The Mickelberry Capital View

We respect Carvana’s operational turnaround and the leadership behind it.

But as investors, we must separate:

Execution quality from valuation risk
Survival from attractiveness
Narrative momentum from fundamental margin of safety

At current prices, Carvana looks less like a distressed recovery story — and more like a stock that has already priced in much of its success.

That doesn’t make it a bad company.
It makes it a challenging investment at today’s valuation.

Final Thought

The market often overpays for redemption stories.

Recognizing improvement is rational.
Paying any price for it is not.

At Mickelberry Capital, we prefer to admire execution without surrendering discipline.

That balance — respect without overpayment — is where long-term capital preservation begins.

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Disclosure: This content is for informational purposes only and does not constitute investment advice. All investing involves risk. Readers should conduct their own research or consult a financial professional before making investment decisions.