:max_bytes(150000):strip_icc():format(jpeg)/INV_CarvanaMachine_GettyImages-1216138210-db6d655cd63046eabd339b51633c030a.jpg "Vehicles inside a Carvana car vending machine in Westminster, California")
Patrick T. Fallon / Bloomberg via Getty Replicas
Key Takeaways
- Carvana stock dropped for the second day in a row after Hindenburg Research disclosed a short position in the company.
- In all events, JPMorgan analysts said their own research into Carvana hasn’t revealed any “red flags.”
- The concerns raised to auto-industry loan defaults are not new and demand for used cars is strong, the analysts said.
Carvana (CVNA) shares take up their slide Friday after short-selling firm Hindenburg Research declared a short position in the company, but JPMorgan analysts stuck with their “overweight” summons on the used-car retailer.
JPMorgan wrote Friday that its own research on Carvana “has not suggested any red flags” regarding the company.
The Hindenburg shot sounded alarm bells about the company’s gross profit per unit and practice of selling consumer auto allows to third parties. Specifically, the hedge fund claimed to have uncovered $800 million in loan sales to an unknown “related third party” and said that nearly 26% of the company’s gross profit over the past nine months was due to such credit sales.
JPMorgan Doesn’t See Carvana Reporting as ‘Inflated’
JPMorgan said in a note that there is “room for CVNA to attend to arrange for more disclosure,” but said the issues around auto-industry loan defaults aren’t new and that demand for used railway carriages remains strong.
“We do not see CVNA’s reported economics as inflated,” the analysts added.
Shares of Carvana almost 5% intraday Friday after spending about 2% Thursday. The company’s shares have, however, nearly quadrupled in value in 2024—a huge turnaround after bankruptcy cares hurt the company’s share price in previous years.