In late 2022, Carvana was a cautionary tale. The used car e-commerce company's stock had crashed 98% from its highs. Debt was crushing. Bankruptcy seemed inevitable. Analysts called it a "zombie company."

Two years later, Carvana will join the S&P 500.

The company's shares have surged more than 8,000% from those 2022 lows, making it one of the most remarkable corporate turnarounds in recent memory. Its market value now exceeds $87 billion—more than Ford and General Motors.

How did this happen? And what does it mean for investors?

The Fall

Carvana's collapse was spectacular. The company had grown explosively during the pandemic, when used car prices skyrocketed and consumers embraced online shopping for everything—including vehicles.

But the company grew too fast, taking on massive debt to fund expansion. When the Federal Reserve raised interest rates aggressively in 2022, two things happened:

  • Car loan rates jumped, crushing demand for vehicles
  • Carvana's debt became far more expensive to service

By December 2022, the stock hit $3.55. Total collapse seemed imminent.

The Turnaround

What followed was a masterclass in corporate restructuring:

Debt restructuring: Carvana negotiated with creditors to push out maturities and reduce interest payments. The company didn't eliminate its debt burden, but it bought time to fix operations.

Cost cutting: Management slashed expenses aggressively. Headcount dropped. Facilities were consolidated. Every aspect of the business was scrutinized for efficiency.

Operational focus: Rather than chasing growth at all costs, Carvana focused on profitability. The company improved its reconditioning processes, logistics network, and customer acquisition costs.

Market timing: Used car prices stabilized, and demand recovered. Carvana was positioned to capture the rebound with a leaner, more efficient operation.

The Results

The transformation showed up in the numbers:

  • Carvana swung from massive losses to profitability
  • The stock went from $3.55 to over $430
  • Market cap grew from under $1 billion to $87 billion
  • The company now sells more cars per quarter than many traditional dealerships

Bank of America expects Carvana to surpass CarMax in quarterly unit sales by 2026. The disruptor is becoming the incumbent.

S&P 500 Inclusion: Why It Matters

Joining the S&P 500 isn't just prestige—it's a structural catalyst:

Forced buying: Index funds tracking the S&P 500 must buy Carvana shares. This creates automatic demand regardless of fundamental analysis.

Institutional access: Many institutional investors can only hold S&P 500 companies. Inclusion opens Carvana to a new investor base.

Visibility: Media coverage, analyst attention, and investor interest all increase for S&P 500 members.

The stock jumped 9% on the inclusion announcement. More buying pressure comes when the addition becomes effective on December 22.

Should You Buy?

The turnaround story is compelling, but at $87 billion, Carvana is priced for perfection:

Bull case: Online used car sales are still a small fraction of the market. Carvana has proven its model works at scale. As the company continues to grow and improve efficiency, profits could expand dramatically.

Bear case: The stock trades at extremely high multiples. Any execution stumble or economic downturn could trigger sharp declines. Competition from CarMax and traditional dealers remains intense.

Lessons for Investors

Carvana's journey offers several takeaways:

1. Turnarounds can work—but they're rare

Most companies in Carvana's 2022 position don't recover. For every Carvana, there are dozens that went bankrupt. Betting on turnarounds is high-risk, high-reward.

2. Sentiment extremes create opportunity

When everyone expected bankruptcy, the stock was a buy—for those with conviction and risk tolerance. Extreme pessimism often marks bottoms.

3. Management matters

Carvana's leadership made difficult decisions quickly. Cost cuts, debt negotiations, and operational improvements didn't happen by accident.

4. Timing is unpredictable

The turnaround took two years. Investors who bought at the bottom endured significant volatility and uncertainty before being rewarded.

The Bottom Line

Carvana's 8,000% surge from bankruptcy fears to S&P 500 inclusion is one of the great comeback stories in recent market history. It's a reminder that markets can be brutally wrong in both directions—creating opportunities for investors who can see beyond the headlines.

Is the stock a buy today? That's a harder question. The turnaround is complete; now Carvana must prove it can grow profitably in a normalized environment. At current valuations, the bar is high.

But for investors who held through the darkest days, Carvana's S&P 500 inclusion is vindication. Sometimes the market's biggest losers become its biggest winners.