We recently published a list of 12 Stocks to Buy with Exponential Growth in 2025. In this article, we are going to take a look at where Carvana Co. (NYSE:CVNA) stands against other stocks to buy with exponential growth in 2025.
With the Trump administration implementing the tariff agenda, global markets continue to feel the impact, with sell-offs taking place as investors are on their toes due to the implications of a dynamic trade landscape. Morgan Stanley believes that stocks in sectors having increased foreign revenue exposure, including technology, materials and energy, can be more vulnerable to tariff uncertainties. If tariffs remain long-lasting, there is a possibility that defensive stocks in sectors like health care and utilities might outperform cyclicals, including consumer discretionary companies.
Resilient Sectors Amidst Uncertainties
The technology, energy, materials and industrials sectors, having foreign revenue exposure as high as 57%, are especially exposed to tariffs, says Morgan Stanley. For instance, the tariffs targeting aluminum and steel can impact the materials sector, while tariffs specific to China or retaliation efforts can have secondary impacts for broader technology space. If the tariff regime escalates, the firm opines that the utilities and healthcare sectors are expected to outperform because of their defensive nature and lower tariff exposure.
If the long-lasting tariff regime comes into action, the defensive US stocks can outperform cyclical sectors such as industrials or consumer discretionary. This is because cyclical sectors are more vulnerable to higher import costs as well as a reduction in international trade. Furthermore, the consumer discretionary companies that have higher reliance on revenues garnered from lower-income consumers can witness the most pressure.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Amidst Tariffs, What Lies Ahead for US Economy?
The strong consumer spending has been driving the economy, and Dr. David Kelly (Chief Global Strategist at J.P. Morgan Asset Management) anticipates another year of 2% GDP growth. One critical impact of Trump’s immigration policies can be less job growth. Another important focus of the Trump administration revolves around deregulation, which is expected to have positive impacts on investing. Kelly believes that deregulation or lack of additional regulation is expected to help some areas, mainly for financial markets.
There could be an increase in bank lending and private credit. Kelly believes that private equity markets and cryptocurrencies are expected to gain the most from deregulation. The outlook on corporate profitability this year remains significantly good. Kelly opines that there has been a broadening out of profits. Earlier, there were technology companies and the Mag Seven and the like who were making money. Now, in Q4 2024, 9 out of 11 S&P 500 sectors witnessed a gain.
Our Methodology
To list the 12 Stocks to Buy with Exponential Growth in 2025, we used a screener to shortlist the companies that analysts see significant upside to. The stocks were ranked in ascending order of their average upside potential, as of March 14. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A customer buying a used car with the help of a finance specialist.
Carvana Co. (NYSE:CVNA)
Average Upside Potential: ~54.5%
Number of Hedge Fund Holders: 84
Carvana Co. (NYSE:CVNA) operates an e-commerce platform for purchasing and selling used cars. Analyst Chris Pierce of Needham reiterated a “Buy” rating on the company’s stock, while maintaining the price objective of $340.00. The analyst’s rating is backed by a combination of factors demonstrating the company’s strong growth potential and strategic advantages. Carvana Co. (NYSE:CVNA)’s innovative approach, which focuses on combining a digital storefront with physical inspection and reconditioning centers, places it favourably well in a fragmented and technologically underdeveloped industry, says the analyst.
Because of this unique model, the company can achieve strong efficiency gains and cost advantages as compared to its competitors operating at a lower scale. Also, the analyst’s price objective implies confidence in Carvana Co. (NYSE:CVNA)’s ability to maintain its growth trajectory. With the company leveraging its underutilized physical assets, it remains well-placed to capture additional market share, which further strengthens the rating. Elsewhere, Bank of America Securities maintained a “Buy” rating on Carvana Co. (NYSE:CVNA)’s stock with the price objective of $270.00.
Recurve Capital, an investment management company, published its Q4 2024 investor letter. Here is what the fund said:
“One year is too short a time frame to evaluate anything and we will never be perfect, but overall, nailing Carvana Co. (NYSE:CVNA) mattered much more than anything else.
We assess our portfolio management performance by looking at the breadth of participation across the portfolio and by comparing our actual results to two parallel scenarios: (1) our performance relative to an equal-weight portfolio of the same positions, and (2) our performance relative to the actual portfolio assuming no further trading over the evaluation period. Encouragingly, our actual performance has been better than both alternate scenarios across substantially all evaluation periods. The primary exception is at the end of 2022, when an equal-weight portfolio would have produced better forward returns by having significantly more exposure to Carvana at its record-low prices. These analyses give me comfort that we add value through our active management and optimization of the portfolio.
We care most about portfolio-level returns which largely depend on slugging percentages, but we also know that having a consistent batting average is important. As shown in the chart below, the median position in our portfolio returned +35% in 2024 on a total return basis (including dividends), below our actual performance but nicely above the returns for the major indices. Carvana’s excellent performance in 2024 pulled our actual performance well above the median, but that was our intention given our large position size. We had healthy contributions across the portfolio, but we also benefited from great slugging percentages in 2023 and 2024…” (Click here to read the full text)
Overall, CVNA ranks 12th on our list of stocks to buy with exponential growth in 2025. While we acknowledge the potential of CVNA as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than CVNA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
