Online car retailing giant Carvana was in the media and investor spotlight after a January 2 report from Hindenburg Research, called the company’s recent turnaround efforts a “mirage.”
Carvana was founded in 2012 and is headquartered in Tempe, Arizona. “After extensive research, we have taken a short position in shares of Carvana Co.,” said Hindenburg in its detailed report.
Carvana promotes its 100 per cent online car sales process as: “Get the car without the car salesman.” The company delivers used cars to their buyers, or buyers can pick them up from giant vending machines.
The Hindenburg Research report says 70 per cent of Carvana’s revenues come from online car sales. Carvana also runs the wholesale auction business ADESA, which it acquired in 2022.
According to Investopedia, short selling is a strategy that speculates that a security will go down in price, allowing investors to bet against what they see as overvalued stocks. “This should help protect the market against speculative bubbles, correct market mispricing, and contribute to more accurate stock valuations.”
A Reuters report, and other media reports citing the Hindenburg Research report, said Carvana did not immediately respond to a request for comment on Hindenburg’s findings. The company did call the Hindenburg report: “intentionally misleading and inaccurate” in a statement reported by the New York Post.
The Hindenburg Research report said that despite facing bankruptcy risks in 2022 and 2023, Carvana’s stock spiked 284 per cent in 2024, “with investors believing the company’s worst days are behind it.”
“Our research, including extensive document review and 49 interviews with industry experts, former Carvana employees, competitors and related parties of the company, undertaken over the course of four months, shows Carvana’s turnaround is a mirage,” said the Hindenburg Research report.
A day after the report’s release, JPMorgan said investors should “buy on weakness” when it comes to Carvana shares.
The report published online at Investing.com said the JDMorgan maintained an Overweight rating on the stock and emphasized Carvana’s financial fundamentals, and other industry trends impacting the used car marketplace.
The analyst said the concerns cited by the Hindenburg report over rising auto industry loan defaults were legitimate, but “far from news” and not specific to Carvana.
You can track the company’s stock value here.
