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When Carvana (NYSE: CVNA) went public in 2017, the bulls claimed it could become the "Amazon (NASDAQ: AMZN) of used cars." It streamlined the car buying process with its online marketplace that delivered cars straight to the customer's door.

But Carvana went through some wild swings after its market debut. It went public at $15, closed at a record high of $370.10 on Aug. 10, 2021, then plummeted to its all-time low of $3.72 on Dec. 27, 2022. At the time, inflation curbed the market's appetite for big-ticket purchases, while rising interest rates made auto loans a lot less appealing.

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However, Carvana's stock subsequently bounced back to about $255 as of this writing. A $10,000 investment in the stock at its all-time low would be worth roughly $685,480 today. A parallel investment in Amazon on the same day would be worth $28,400.

Carvana's stock bounced back as interest rates stabilized and the used-car market warmed up again. Carvana was clearly the hotter stock over the past two years, but will it remain a better buy than Amazon for the foreseeable future?

Carvana has passed its cyclical trough

Carvana's units sold surged 37% in 2020 and 74% in 2021, but dipped 3% in 2022 and plummeted 24% in 2023 as interest rates rose. That decline was jarring, but its units sold finally grew 28% year over year in the first nine months of 2024. It expects that recovery to continue in the fourth quarter.

Most of that recovery was driven by lower rates, the stabilization of the used-car market, and its growth in average monthly unique website visitors, which more than doubled from 8.5 million at the end of 2020 to 17.5 million in the third quarter of 2024. It also expanded its ecosystem by acquiring online auction platform ADESA in 2022.

From 2023 to 2026, analysts expect Carvana's revenue to grow at a compound annual growth rate (CAGR) of 20% as its earnings per share rise (EPS) at a CAGR of 72%. We should take those estimates with a grain of salt. With an enterprise value of $38 billion, Carvana's stock might seem cheap at two times its projected sales and 22 times its adjusted EBITDA for 2025 -- but it looks less compelling at 128 times its forward earnings on the basis of generally accepted accounting principles (GAAP).

Amazon's business is warming up again

Amazon's revenue rose 38% in 2020 and 22% in 2021. Its e-commerce sales soared as the pandemic drove people to make more online purchases, while the surging usage of cloud-based apps boosted its cloud infrastructure revenue.

But in 2022, Amazon's revenue rose only 9% as it lapped its pandemic-driven growth spurt. Rising inflation and higher rates also curbed consumer spending on its marketplace and drove more companies to rein in their cloud spending.

In 2023, Amazon's revenue rose 12%. That acceleration was driven by its e-commerce business, which prioritized faster deliveries and expanded into more countries; and its Amazon Web Services (AWS) cloud business, which gained momentum as more companies upgraded their cloud infrastructure services to handle the latest AI applications.

From 2023 to 2026, analysts expect Amazon's revenue and EPS to grow at a CAGR of 11% and 38%, respectively. That growth should be fueled by the stickiness of its Prime ecosystem, which now serves over 200 million subscribers worldwide, and AWS, which operates at much higher margins than its core e-commerce marketplaces. It doesn't look like a bargain at 39 times forward earnings, but its robust growth and leadership of the e-commerce and cloud markets might justify that higher valuation.

The better buy: Amazon

Carvana mounted a remarkable comeback, but elevated interest rates could limit its upside potential over the next few quarters. Meanwhile, Amazon's business should warm up again as the macro environment gradually improves, and it still looks reasonably valued relative to its long-term growth potential. So even though Amazon's stock underperformed Carvana's over the past two years, it could regain its footing and surge higher as it fires up its e-commerce and cloud growth engines again.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.