Carvana Co. (CVNA): Margin Gains Meet a New Amazon–Hertz Rival

Immediate Development: Strong FY2024 Results Meet Amazon–Hertz Entry#

Carvana [CVNA] closed the fiscal year with $13.67B in revenue and $1.00B of operating income for FY2024, while the share price hovered near $334.91 (last quote), leaving the stock trading at roughly 83.10x trailing earnings. Those numbers arrive at the same moment Amazon and Hertz launched a marketplace tie-up that brings fleet-sourced certified used vehicles onto Amazon Autos—an event that materially alters the competitive backdrop for online used-car retailing and was widely reported on Aug. 20, 2025 Business Wire. The juxtaposition creates an urgent question for investors: can Carvana’s recent progress on margins and cash flow withstand a fast-scaling distribution and fleet-supply entrant backed by Amazon’s consumer reach and Hertz’s physical footprint?

How Carvana Performed: Revenue, Profitability and Cash Flow#

Carvana’s FY2024 results show a clear inflection relative to FY2023. Revenue accelerated from $10.77B to $13.67B, a +26.94% year-over-year increase. Gross profit rose to $2.71B, pushing the gross margin to 19.83%. The company produced $1.36B of EBITDA and converted to a $210MM GAAP net income for FY2024, reversing prior-year volatility and producing positive operating income ($1.00B) for the year. Operating cash flow and free cash flow were strong relative to recent history: operating cash flow was $918MM and free cash flow was $827MM, a material improvement after negative free cash flow in earlier turnaround years. These figures are taken from Carvana’s FY2024 filings (filed 2025-02-19).

On a margin basis, FY2024 represents the clearest sign yet of durable operational improvement. The company’s EBITDA margin for the year is roughly 9.95% (EBITDA $1.36B / Revenue $13.67B) and free cash flow margin sits near 6.05% (FCF $827MM / Revenue $13.67B). These outcomes reflect a combination of higher gross profit per unit and tighter operating expense control relative to the high-cost years of 2022.

At the same time, key liquidity and leverage measures improved. Carvana reported cash and short-term investments of $2.18B at year-end and total debt of $6.05B. Using the standard net-debt convention (total debt minus cash and short-term investments), Carvana’s calculated net debt at year-end is $3.87B. That calculation differs from a net debt figure reported elsewhere in the dataset; I use the debt-minus-cash convention for comparability across peers and to compute leverage multiples.

Financial Trend Table (Income Statement, FY2021–FY2024)#

The table above condenses the income-statement trajectory that explains market sentiment: revenue recovered and expanded in 2024 versus 2023, gross margin improved materially, and operating income swung positive. The path mirrors management’s stated focus on inventory optimization, faster turnover and cost discipline, which collectively fed margin expansion.

Balance Sheet & Cash Flow Table (FY2021–FY2024)#

*Calculated Net Debt = Total Debt - Cash & Short-Term Investments (standard convention used here). The dataset includes an alternate net debt figure for FY2024; this table uses the debt-minus-cash convention for cross-year comparability and peer benchmarking.

Reconciling Conflicting Data Points#

While synthesizing the record, I identified a meaningful discrepancy in net-debt and select TTM ratios published in the dataset. The dataset lists net debt for FY2024 as $4.33B, while the arithmetic result using reported total debt $6.05B and cash & short-term investments $2.18B yields $3.87B. Similarly, a reported current ratio of 4x is at variance with the balance-sheet snapshot (Total Current Assets $4.87B / Total Current Liabilities $1.34B = 3.63x). Where figures conflict, I prioritized arithmetic calculations from the line-item balance-sheet fields (assets, liabilities, cash, and debt) because those are the base quantities that feed leverage and liquidity multiples. I flag the discrepancies here because they materially affect leverage multiples and covenant headroom calculations.

What Drove the FY2024 Improvement?#

Carvana’s FY2024 rebound reflects three core execution threads. First, higher gross profit per unit—evidenced by the jump in gross margin to 19.83%—shows better inventory sourcing and pricing execution versus low-margin fleet or auction-sourced cycles in prior years. Second, operating cost discipline compressed SG&A relative to revenue growth; reported selling, general & administrative expenses were $1.71B, supporting operating leverage as revenue scaled. Third, working-capital management improved: the company generated positive operating cash flow of $918MM and converted that into substantial free cash flow, signaling healthier cash conversion after the working-capital swings of 2022.

Cash generation matters because Carvana’s business historically consumed capital to grow inventory and logistics investments. The shift to positive FCF in consecutive years (2023 and 2024) represents the clearest objective indicator that the company has reduced liquidity risk and built real financial optionality.

Competitive Shock: Amazon + Hertz Changes the Game on Distribution and Supply#

The market’s second major input is the Hertz–Amazon partnership, which places fleet-origin inventory in front of Amazon’s customer base with integrated financing and local pick-up via Hertz outlets. The alliance is not an abstract threat; it introduces a repeatable, high-volume source of low-mileage inventory and a distribution channel with dramatically larger consumer traffic than niche auto marketplaces. Coverage of the partnership and its initial rollout was reported across outlets including Business Wire and national media on Aug. 20, 2025 Business Wire. The practical consequence is that an incremental share of marginal used-car purchases can be diverted to a platform that combines Amazon’s checkout familiarity and Hertz’s offline footprint.

The commercial effect on Carvana depends on three factors. One is the composition of demand: if Amazon–Hertz primarily displaces buyers who value price and convenience over reconditioning standards and integrated financing, Carvana’s vertically integrated model may retain customers who prioritize inventory quality and post-sale service. Two is pricing: fleet-origin inventory can be priced aggressively because fleet operators can accept lower resale margins in return for scale turnover. Three is geographic rollout speed: a limited regional pilot is strategically different from a rapid nationwide expansion. The short-term market reaction—Carvana shares falling mid-single digits on the day of the news—reflects investor concern about these dynamics, but it does not yet imply a structural, irreversible market-share transfer [AInvest; Benzinga].

Market Reaction and Analyst Signals#

In the days around the announcement, the stock experienced intraday weakness and several outlets reported pre-market slides of roughly 4–5% [AInvest]. Analysts’ reactions were mixed but measured: some firms emphasized that Amazon’s move may be additive to demand for online used-car purchasing rather than zero-sum, while others trimmed near-term assumptions to reflect increased competition. BofA publicly reiterated a constructive stance shortly after the announcement, arguing the move was not directly one-to-one competitive with Carvana’s vertically integrated approach [Investing.com]. The net effect was volatility rather than a wholesale rerating: Carvana’s implied multiples remain elevated by historical norms, driven by recent earnings and still-high absolute share price levels.

Strategic and Financial Implications#

Carvana’s strategic answer to the new entrant must operate on two time frames. Near-term, the company needs to protect margin and cash generation while selectively defending unit volume—an approach supported by its stronger FY2024 FCF and operating cash flow. Management can temporarily increase marketing or limited promotions without jeopardizing liquidity because of the greater cash cushion versus 2022 and earlier. Medium-term, success hinges on differentiation that is hard for a marketplace-plus-fleet model to replicate: superior reconditioning yields, higher conversion of financing and warranties, and logistics scale that keeps delivery costs predictable.

From a capital-allocation perspective, the improved cash flow reduces the immediacy of refinancing or equity raises even with total debt near $6.05B. Using the calculated net-debt figure $3.87B and FY2024 EBITDA $1.36B, Carvana’s net-debt-to-EBITDA multiple is roughly 2.85x. That level sits in a pragmatic range for a company of this profile, but the metric is sensitive to EBITDA swings and working-capital volatility; investors should monitor quarterly cash conversion closely because fleet-driven price competition could compress margins and elevate leverage quickly.

Historical Context: Why This Feels Different from 2022#

Carvana’s 2022 performance was a stress test: the company posted negative EBITDA and negative free cash flow amid inventory and macro pressure, producing a negative equity balance on the balance sheet. The FY2024 results represent a regime change from that period. Revenue is higher than 2022, margins have recovered meaningfully, and the company has rebuilt positive equity and liquidity buffers. This historical contrast matters because it changes the range of strategic choices management can make: Carvana can now spend to defend share without endangering solvency in the same way it would have in 2022.

Still, the presence of large, capital-rich entrants operating with different economics (fleet-sourced supply vs. retail acquisition) creates a structural challenge that did not fully exist in prior years. In previous competitive cycles Carvana competed mostly with independent dealers and auction-sourced sellers; Amazon-plus-Hertz introduces a low-cost supply channel matched to a top-tier distribution platform.

What This Means For Investors#

Investors should frame the situation as a balance between improved fundamentals and a heightened competitive test. Carvana has demonstrable operational progress: revenue growth of +26.94% YoY in FY2024, a gross margin lift to 19.83%, and positive free cash flow of $827MM. Those are measurable advances that materially reduce execution risk relative to 2022. At the same time, the Amazon–Hertz partnership is a credible strategic threat because it couples fleet supply with Amazon’s discoverability and Amazon-branded consumer trust, creating a natural alternative for a subset of online buyers.

Monitor three variables that will determine the near-term investment case. First, quarterly margin trends and unit economics: sustained pressure on gross margin or a slide in adjusted EBITDA would quickly re-elevate refinancing and valuation risk. Second, customer acquisition cost and financing conversion rates: if Amazon–Hertz proves effective at converting first-time online buyers, Carvana must defend lifetime value metrics. Third, cash conversion and debt amortization: if FCF declines and debt maturities cluster, the company’s financial flexibility could tighten faster than markets expect.

Key Takeaways#

Carvana exited FY2024 in markedly better financial shape than it entered 2022: $13.67B revenue, positive operating income, and $827MM free cash flow demonstrate execution on margin and working-capital priorities. The Hertz–Amazon alliance, however, is a meaningful competitive development that increases the supply of late-model used cars and places them behind one of the largest consumer discovery engines in the world. The immediate market reaction was a pullback in CVNA shares and some analyst recalibration; the deeper question is whether Carvana’s differentiated execution and improved cash generation can offset potential price and share pressure from a fleet-plus-marketplace model. Investors should watch quarterly margin durability, cash conversion, and any evidence that Amazon–Hertz is taking share in the same geographies and customer cohorts where Carvana is strongest.

Conclusion: Execution Still Matters#

Carvana’s FY2024 financial performance is not just a one-off beat; it is the product of operational choices that improved sourcing, reconditioning and cost structure. Those choices produced measurable cash generation and a healthier balance sheet. The arrival of Amazon–Hertz does not nullify those gains, but it raises the competition floor and changes the strategic calculus. The coming quarters will reveal whether Carvana’s margins are sustainable when confronted with aggressive, fleet-backed pricing and Amazon-scale distribution. For now, the company’s improved cash flows and margin progress give management options that did not exist in the prior stressed cycle—options that will be decisive in how the company defends and redefines its place in the online used-car ecosystem.