Carvana logo is seen in this illustration taken June 27, 2022. REUTERS/Dado Ruvic/Illustration

By Medha Singh

Dec 8 (Reuters) - Carvana, the pioneering online used-car dealer known for its iconic car vending machines, is set to make a splashy entry into the S&P 500 index, capping a dramatic three-year turnaround that has seen its market value top legacy carmakers GM and Ford.

Shares of Carvana jumped in premarket trading on Monday and were on track to hit a record high as well as extend their 10-day winning streak.

The stock had hit record lows in 2022 amid fears of a debt default and possible bankruptcy as demand for used cars slowed.

It has since surged more than 8,000%, nearly doubling in 2025 alone, as tighter cost controls and a rebound in demand helped the company swing to profitability.

The company's market value now stands at about $87 billion, above legacy automakers Ford's $52 billion and General Motors' $71 billion.

Carvana's stock trades at 57.4 times forward earnings, far above the single‑digit multiples of its Detroit rivals.

The stock "has competitive momentum with vertical integration and scale," said Stephanie Link, chief investment strategist at advisory firm Hightower Advisors.

"It's a long-term 'buy' and I'd use any pullbacks to add for the long-term secular growth story and market share expansion."

The stock was last up 9% at $436 premarket, looking to extend its 10-day winning streak.

The inclusion, announced by S&P Dow Jones Indices late on Friday, will be effective from December 22 and is expected to spur buying from index-tracking funds.

STRONG FUNDAMENTALS & LOYAL FOLLOWING

Carvana has been a popular stock among retail traders, who often pile into high-momentum and heavily shorted shares.

"It continues to have a loyal stock following who believe their model can continue to gain market share and improve profitability," said Rick Meckler, a partner at Cherry Lane Investments, a family investment office.

Its latest share surge cost bearish investors about $1 billion in losses, data analytics firm Ortex estimated. The overall short interest sits near the lowest in years as the company's fundamentals have strengthened.

Carvana sold a record 155,941 retail units in the third quarter, while total revenue surged 55% to $5.65 billion, the company reported in October.

The company could overtake bigger rival CarMax, in terms of volumes, in quarterly used-car sales volumes by the fourth quarter of 2026, an analyst said in November.

"It might not see the explosive growth in share price you've had for the past two years ... but the business continues to move in the right direction," said Chris Beauchamp, chief market analyst at IG Group.

(Reporting by Medha Singh and Ragini Mathur in Bengaluru, additional reporting by Aishwarya Jain; Editing by Shinjini Ganguli)