Carvana Stock Drops Amid Short-Seller Report; Analysts Remain Bullish

Carvana Co. (CVNA) shares have continued to decline for a second day following a negative report by short-seller Hindenburg Research. The report, released on January 2, 2025, alleged a "father-son accounting grift" at the company, leading to a drop in the stock price. Despite the bearish report, analysts remain largely bullish on Carvana's prospects.



Hindenburg Research accused Carvana of manipulating its financial statements by recognizing revenue prematurely and understating its inventory levels. The report also claimed that the company's Wholesale Services segment was propped up by unstable loans, which could lead to a significant drop in revenue if the loans were to default. Additionally, the report alleged that Carvana's CEO, Ernie Garcia, had engaged in related-party transactions with his father, which could lead to conflicts of interest.



Carvana's management has rejected these allegations, stating that they are "without merit." J.P. Morgan, an investment bank, also defended Carvana, stating that its own deep dives on the company had not uncovered "any red flags." Several analysts, including those from RBC Capital, Needham, and Morgan Stanley, have reiterated their "Buy" ratings on Carvana's stock, indicating their confidence in the company's prospects despite the short-seller report.

Despite the negative report, Carvana's stock price has continued to rise, indicating that many investors remain optimistic about the company's future prospects. The current consensus among analysts is that Carvana is a strong buy, with an average price target of $247.00, representing a 21.46% upside from the last price of $203.36.



In conclusion, while the short-seller report by Hindenburg Research has led to a decline in Carvana's stock price, analysts remain largely bullish on the company's prospects. The report's allegations have been addressed by Carvana's management and defended by several analysts. Investors should consider the company's strong fundamentals and growth potential when making investment decisions. As always, it is essential to conduct thorough research and consult with a financial advisor before making any investment decisions.