A 50% pop from their pre-earnings price should tell you everything you need to know about Carvana Co.'s (NYSE: CVNA) recent Q4 report. Considering just how hard the stock has been rallying since bottoming out from an eye-watering fall last year, expectations were understandably high. For context, the online used car retailer had seen its shares jump more than 1,200% coming into last week's report. However, it's clear they didn't disappoint. 

There were a ton of bright spots for investors to get excited about, such as the record total gross profit per unit print, which increased to $5,730 from $3,063 this time last year, and the record net income of $150 million. Adjusted EBITDA was also at an all-time high as the company inched closer to the promised land of profitability.

But with the stock having already jumped so much, is there still an opportunity here for those of us on the sidelines? You better believe it. Let's jump in and see why. 

Bullish industry tailwinds

The whole used car market is one that's been grabbing headlines for some time now. Around the world, used car prices have benefited from surging inflation and are holding their ground like never before. Carvana was one of the darlings of the pandemic's tech bubble and also one of those that fell the hardest when the bubble burst. A stunning 4,000% run through August 2021 showed just how much investors were expecting, but when interest rates started to rise in the fight against inflation, Carvana's growth model imploded, and so did its stock. 

But the market it serves has remained hot, and with rates now set to start dropping, we can already see the flood of bullish momentum coming back into Carvana's shares. This, and the company's strong fundamental performance of late, is unlikely to end anytime soon as long as inflation continues to cool. 

This was a theme picked up on by Raymond James after last week's report when they upgraded their rating on Carvana shares off the back of the solid report. They're now looking for Carvana to hit profitability by 2025, but at the same time, they are urging caution in the near term. 

With a fresh rating of Market Perform, they stopped short of making it a full bullish upgrade to Market Outperform. They even went so far as to tell clients, "All in, despite the recent cost and debt restructuring successes, we remain cautious and opt to stay on the sidelines until we see clearer evidence of sustained cash flow improvement."

Getting involved

Similar stances were taken by the likes of Morgan Stanley and the Royal Bank of Canada. Both boosted their price targets on Carvana stock in light of last quarter's performance, but at $45 apiece, this was blasted out of the water when Carvana shares gapped up the morning following the report. With them having further their gains since and currently treading water in the mid-$70s, there's a disconnection somewhere. 

It feels like the past week's rally has been a little overdone, and some common sense is needed. Indeed, at 74, Carvana's relative strength index (RSI) points to extremely overbought conditions, which, when considering the analysts' cautiously bullish stance, warrants a drop in the near term. 

But this is exactly what those on the sidelines should be looking for. There's no doubt that Carvana's long-term potential remains intact, and last week's report only further solidified it. But with recent pop looking a bit frothy, a pullback over the coming sessions back to the low $60s, if not lower, would create a golden entry opportunity. We don't have to look back too far on the chart to see how quickly Carvana's shares can run once they get going, so fingers crossed we can pick some up before they go again. 

The article "Carvana's Stock Outlook Just Got Brighter, Here's Why" first appeared on MarketBeat.