Carvana's (CVNA) stock experienced a downturn on Friday following short-selling firm, Hindenburg Research, going public with a short position on the company. In contrast, JPMorgan analysts retained their "overweight" recommendation on the used-car retail enterprise.
Hindenburg's report raised questions about Carvana's gross profit per unit and its practice of selling consumer auto loans to third parties. The report alleged $800 million in loan sales to an undisclosed associated third party. It also stated that these loan sales accounted for nearly 26% of Carvana's gross profit in the last nine months.
Despite these allegations, JPMorgan voiced their confidence in the firm and stated their research on Carvana showed no warning signs. They did, however, highlight the need for more transparency from CVNA, while dismissing loan defaults in the auto industry as, not a new issue. The analysts averted investors' concerns and reiterated that the demand for used-cars continues to be robust.
The company's shares dipped by almost 5% on Friday, following a 2% decrease the previous day. Nevertheless, it is notable that Carvana's shares have almost quadrupled in value in 2024 - a remarkable recovery from previous years, marred by bankruptcy concerns affecting the shares' value.