The S&P 500 large-cap stock index undergoes quarterly rebalances to reflect evolving market conditions. Managed by S&P Dow Jones Indices, the process involves evaluating companies based on criteria like market capitalization, liquidity, profitability, and sector representation. Additions and deletions ensure the index captures the top 500 performers, with changes announced after market close and effective before trading opens on the specified date.
This week, the committee revealed its latest adjustments that will take effect on Dec. 22. Among the moves, Carvana (NYSE:CVNA) will be one of three companies joining the index, an inclusion that caps a stunning turnaround: its shares have nearly doubled in 2025 and surged more than 5,000% over the past three years, pushing its market cap to nearly $87 billion.
This transformation positions the online used car dealer as a mainstream heavyweight, a remarkable shift from its roots as a niche disruptor.
Carvana’s trajectory has been wild. In late 2022, amid a post-pandemic inventory glut and rising interest rates, the online used-car retailer teetered on bankruptcy. Shares plummeted below $4 — penny stock territory — erasing billions in market value and prompting debt restructuring talks. Three years later, Carvana has overhauled its operations and showcases a leaner model.
Key to its rebound have been aggressive cost cuts, including workforce reductions and facility consolidations, which flipped adjusted EBITDA positive by mid-2023. Vehicle sales hit record highs in 2025, up 43% year-over-year, thanks to an enhanced e-commerce platform and next-day delivery in over 300 markets.
Partnerships, like offloading used rentals from Hertz (NASDAQ:HTZ), bolstered its inventory flow, while analysts credit a “better business model” than peers like CarMax (NYSE:KMX). Wedbush Securities just upgraded Carvana’s stock from neutral to outperform and raised its price target to $400 per share on improved profitability margins.
It’s true Carvana rode the meme stock wave in 2021 — and continues to do so — that at various times has created a retail buying frenzy, but index inclusion demands more substance. S&P criteria emphasize sustained earnings and liquidity; Carvana’s third-quarter net income of $263 million (up 78% from last year) on $5.6 billion in revenue met the bar, proving the meme hype evolved into real growth.
S&P 500 inclusion typically triggers the “index effect,” where mutual funds and exchange-traded funds (ETFs) must buy shares to mirror the benchmark. Funds like Vanguard S&P 500 ETF (NYSEARCA:VOO) and SPDR S&P 500 ETF Trust (NYSEARCA:SPY) alone hold over $1 trillion in assets. This passive influx often spikes prices 5% to 10% after addition.
