This week witnessed a 9% upward surge in Carvana's share price.
In 2025, Carvana's (CVNA) stock didn't have the best start, but it quickly bounced back due to some analysts' defense against a harsh short-seller report. After Hindenburg Research released a damning critique, two analysts, Chris Pierce from Needham and Rajat Gupta from JPMorgan Chase, doubled down on their bullish stances. Even more, RBC Capital and Citigroup decided to upgrade their recommendations to 'buy'.
Hindenburg Research's criticism was not for the faint of heart. The short-seller accused Carvana of various misdeeds, such as more than 25% of its gross profit stemming from loan sales to third parties. But analysts had different opinions and didn't let the short-seller's allegations deter them from believing in Carvana's potential.
Despite the positive sentiment, investors should not forget the volatile nature of Carvana's stock. The market is challenging, and managing expectations is crucial.
When considering Carvana's earnings outlook, analysts forecast annual revenues of $3.33 billion and EPS of $0.24, representing significant year-over-year increases (updates from Zacks Investment Research). Moreover, the consensus EPS estimate received a boost of 5.62% over the last 30 days.
However, critics of Carvana claim the company has engaged in unethical accounting practices. Hindenburg Research mentioned potential revenue recognition issues, questionable loan sales, and dubious partnerships as areas of concern. Additionally, some analysts argue that Carvana might be hiding higher delinquencies by offering loan extensions, which would further deteriorate the loan quality.
Pomerantz Law Firm is currently investigating if Carvana engaged in any form of securities fraud for potential legal remedies for investors.
Despite the storm surrounding Carvana, some analysts believe the company could seize this moment to clean up its operations and repair its tarnished reputation. By focusing on improving its business fundamentals, Carvana could rebuild investor trust and set up a promising future for the company.
Hindenburg Research's damning critique of Carvana, specifically accusing it of deriving more than 25% of its gross profit from loan sales to third parties, posed a significant challenge to the company's finance and investing reputation. Despite this, analysts like Chris Pierce from Needham and Rajat Gupta from JPMorgan Chase remained bullish, and even firms like RBC Capital and Citigroup upgraded their recommendations to 'buy'. However, some critics continue to question Carvana's accounting practices, citing potential revenue recognition issues and dubious partnerships.
