Carvana Stock Falls as Hindenburg Calls Turnaround a 'Mirage'

Carvana Stock Falls as Hindenburg Calls Turnaround a 'Mirage'

Carvana stock dropped nearly 2% on Thursday after short-seller Hindenburg Research announced a short position in the company, claiming its 2024 recovery is a "mirage." Hindenburg accused the online used-car retailer of boosting profits by selling risky subprime auto loans, citing $800 million in loan sales to an unnamed "related third party." These sales reportedly contributed 26% of Carvana's gross profit over the past nine months.

Carvana denied the allegations, calling them "intentionally misleading" and asserting it remains focused on executing its plans for 2025. The company had earlier reported better-than-expected third-quarter earnings and raised its full-year outlook, contributing to a nearly fourfold increase in its stock price in 2024.

Hindenburg also criticized insider stock sales, noting that Ernie Garcia II, the father of Carvana’s CEO, sold $3.6 billion in shares before the company’s downturn in 2022 and an additional $1.4 billion in 2024 during the stock’s recovery.

Despite the controversy, analysts remain positive, with a $255 average price target suggesting a 28% upside from Thursday’s closing price of just under $200.