Carvana's Resilience Continues as Analysts Remain Bullish on the Stock
Shares of Carvana (NYSE: CVNA) have been steadily climbing over the past two days, defying a recent short-seller attack that had sent the stock plummeting. As the online used car dealer continues to bounce back from the setback, Wall Street analysts are solidifying their support for the company.
Carvana's Response to Hindenburg Research
Last week, short-seller Hindenburg Research unleashed a scathing report claiming that Carvana was engaging in undisclosed related-party transactions and had an overvalued stock. The attack sent the stock plummeting on Friday, but over the past two sessions, analysts have largely stood by Carvana. This renewed confidence comes after the company announced its agreement with Ally Financial to purchase up to $4 billion of loan receivables over the next year.
Analysts' Reactions
Several prominent Wall Street analysts have publicly expressed their continued support for Carvana following Hindenburg's attack. RBC Capital upgraded the stock from sector perform to market perform, setting a price target of $280 and calling the sell-off an opportunity. JPMorgan, which had initially downgraded its rating due to concerns over Carvana's profitability, has since maintained its overweight rating on the stock, stating that its research had not uncovered any red flags.
Wedbush also chimed in, dismissing Hindenburg's claims as exaggerated and old news. Needham went even further, labeling the short thesis "misplaced" and maintaining a buy rating with a $330 price target. These developments have contributed to Carvana's 7% surge as of 11:02 a.m. ET today.
The Ally Deal: A Vote of Confidence
Carvana's agreement with Ally Financial is seen by many analysts as a vote of confidence in the company's business model. The deal demonstrates that the relationship between Carvana and its lender remains strong, which should alleviate concerns raised by Hindenburg Research. This renewed partnership has given investors reason to believe that the company's claims are largely overblown.
A Closer Look at Carvana's Growth
Carvana's stock has indeed experienced a remarkable surge since its bottom in 2022. The company's efforts to slash costs through layoffs and refinancing have paid off, returning the business to profitability after years of rapid but unprofitable growth. With operating income now standing at $337 million and revenue growth reaching 32% to $3.66 billion, it's clear that Carvana is on a solid path forward.
The Road Ahead for Carvana
While some may view Carvana as an expensive stock making it vulnerable to a pullback, its growth rate and improving margins justify a premium valuation. With analysts still optimistic about the company's prospects, investors may see this recent short-seller attack as an opportunity to buy in before the stock potentially surges again.
Conclusion
As the dust settles from last week's Hindenburg Research report, Carvana is proving itself to be more resilient than initially thought. Analysts are continuing to line up behind the company, and its agreement with Ally Financial has provided a much-needed boost of confidence. With several analysts maintaining buy ratings and price targets ranging from $280 to $330, it seems that this online used car dealer still has plenty of life left in it.