Today, Carvana's share price was inching upward.
Carvana's shares were on an upward trajectory once more, tacking on gains for the second consecutive day. The reason? Wall Street analysts seemed unfazed by last week's short-seller attack on the online used car giant.
By 11:02 a.m. ET, CVNA was up 7%, following two days of confidence-boosting endorsements from the financial community.
Bouncing Back from Criticism
Last week, Hindenburg Research launched an attack, accusing Carvana of undisclosed related-party transactions and overvaluing its stock. The company's share price plummeted as a result, but it has since staged a remarkable comeback.
Wall Street analysts have largely stood behind Carvana, especially after it renewed its agreement with Ally Financial to buy up to $4 billion of its loan receivables over the next year. This demonstrates the robustness of the relationship between the two companies.
RBC Capital upgraded the stock from 'sector perform' to 'market perform,' setting a price target of $280, highlighting the opportunity presented by the sell-off. JPMorgan, Wedbush, and Needham all maintained bullish stances, dismissing Hindenburg's claims as exaggerated or old news.
What's Next for Carvana?
Given its impressive recovery, it's no surprise that Carvana found itself in the crosshairs of a short-seller. The stock's astronomical growth, aided by slashed costs, job cuts, and refinancing, has returned it to profitability after years of unprofitable expansion.
Now operating on a GAAP basis, Carvana reported an impressive $337 million in operating income and a 32% revenue growth to $3.66 billion. There hasn't been any indication of major issues following the short-seller report. In fact, Carvana labelled Hindenburg's claims as "intentionally misleading and inaccurate."
The Ally deal serves as assurance that Hindenburg's allegations are overblown. While the stock's valuation makes it susceptible to a pullback, its growth rate and improving margins warrant a premium.
Sources:
- Yahoo Finance
- PR Newswire
- Carvana Investor Relations
- Seeking Alpha
- Business Wire
- Despite facing criticism from a short-seller and accusations of overvaluing its stock, Carvana's finance team has managed to secure a renewed deal with Ally Financial, further investing up to $4 billion in its loan receivables.
- Some analysts, including RBC Capital, have revised their outlook on Carvana's stock, upgrading it from 'sector perform' to 'market perform' and setting a price target of $280, acknowledging the opportunity presented by the recent sell-off.
- As Carvana continues to grow, with a 32% revenue increase to $3.66 billion and an impressive $337 million in operating income, layoffs and slashed costs have contributed to its return to profitability, making its stocks a premium investment, even if somewhat overvalued.
- In response to the short-seller's allegations, Carvana firmly rejected the claims as "intentionally misleading and inaccurate," further emphasizing its financial resilience and commitment to transparency in its financial reporting and investing practices.
