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Carvana Co. CVNA has reinstated an agreement to sell $4 billion of used-car loan receivables to Ally Financial. This yearlong deal follows claims by short-seller Hindenburg Research that Ally was distancing itself from its partnership with the online car marketplace.
Per the Bloomberg News report, the agreement reinforces a crucial relationship for Carvana, which finances loans for its buyers before selling the receivables to other lenders. Per BNP Paribas data, Ally has historically purchased enough receivables to support half of Carvana's new loan originations.
Last week, Hindenburg Research, a short-selling firm, revealed a short position in the online used-car retailer. Carvana stock had nearly quadrupled in 2024, driven by increased demand for used cars — a dramatic recovery from previous years marred by bankruptcy concerns. However, Hindenburg described this recovery as a mirage. The firm accused Carvana of selling customer auto loans to third parties, primarily in the high-risk subprime and deep subprime markets. Per Hindenburg, the company sold $800 million in loans to an unidentified related third party and nearly 26% of Carvana’s gross profit over the last nine months came from such sales.
Carvana rejected the report. Per Carvana’s spokesperson, the claims were intentionally misleading and had been made by other short sellers to profit from a decline in the stock price. The company emphasized its commitment to executing its strategy for a strong 2025.
Hindenburg also called out insider activity in the company, particularly the stock sales by CEO Ernie Garcia III’s father, Ernest Garcia II. Per the report, the elder Garcia sold $3.6 billion in stock between August 2020 and August 2021, ahead of the stock’s slump in 2022 and 2023. He reportedly sold another $1.4 billion as the stock rebounded in the past year. The Garcia family’s control of Carvana has faced scrutiny before, including lawsuits accusing them of operating a pump-and-dump scheme for personal gain.
Carvana’s Zacks Rank & Other Key Picks
CVNA currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the auto space are Canoo Inc. GOEV, Geely Automobile Holdings Limited GELYY and Blue Bird Corporation BLBD, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GOEV’s 2024 sales and earnings suggests year-over-year growth of 264.56% and 75.58%, respectively. EPS estimates for 2024 have improved $27.41 in the past 60 days. EPS estimates for 2025 have improved $2.40 in the past seven days.
The Zacks Consensus Estimate for GELYY’s fiscal 2025 sales and earnings suggests year-over-year growth of 60.04% and 138.89%, respectively. EPS estimates for fiscal 2025 and 2026 have improved by 63 cents and 62 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for BLBD’s fiscal 2025 sales and earnings suggests year-over-year growth of 10.97% and 12.14%, respectively. EPS estimates for fiscal 2025 have improved 18 cents in the past 60 days.