Used car e-commerce platform Carvana (CVNA) renewed its deal with Ally Financial (ALLY), which will allow it to sell up to $4 billion in car loans over the next year. This pushes back against claims from short-seller Hindenburg Research that said Ally was stepping back from the partnership. It is worth noting that Ally has been a key partner as it has historically purchased around 50% of Carvana’s customer loans. As a result, Carvana’s stock jumped after the announcement, as it tries to bounce back after dropping due to Hindenburg’s report.
Stay Ahead of the Market:
- Discover outperforming stocks and invest smarter with Top Smart Score Stocks
- Filter, analyze, and streamline your search for investment opportunities using Tipranks' Stock Screener
The report accused Carvana of risky lending practices and claimed that the company’s growth relied on deals with companies connected to its CEO’s father. The report also claimed that Ally’s receivable purchases were slowing, with only $2.9 billion projected for 2024. However, the new agreement with Ally suggests that Carvana’s loan sales are still solid.
Since restructuring in 2023, Carvana has returned to profitability and regained investor confidence. In addition, JP Morgan five-star analyst Rajat Gupta CFA recently said that Carvana’s per-sale earnings don’t seem inflated but called for more transparency. Unsurprisingly, Carvana dismissed Hindenburg’s accusations as misleading and said similar claims had already been made by other short sellers trying to drive the stock down.
Is CVNA Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CVNA stock based on seven Buys, eight Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 289% rally in its share price over the past year, the average CVNA price target of $247 per share implies 35.2% upside potential.
