Carvana Stock Rallies as Analysts Refute Short Report

Carvana shares rallied 5.6% in premarket trading as analysts refuted short report.

BTIG has reiterated its Buy rating and $535.00 price target on Carvana despite the stock facing significant pressure due to circulating allegations about the company’s relationship with DriveTime.

The research firm maintained that the most serious allegations circulating in the market are "not well-founded" and that these core allegations underpin many other assertions being made against the online used car retailer.

JPMorgan analyst Rajat Gupta keeps an Overweight rating on Carvana with a $510 price target following yesterday’s short-seller report from Gotham City Research. JPMorgan says a “consistent theme” in the report is the mixing up of cumulative fair value metrics versus annual and static metrics, leading to a “significant misrepresentation of facts.” JPMorgan is surprised by the magnitude of Carvana’s selloff yesterday, “particularly in context of the fairly straightforward math around typical ABS deal economics.”

Shares of Carvana plummeted 14.2% Wednesday following short-seller accusations that the online used retailer overstated earnings with the help of businesses controlled by CEO Ernie Garcia III’s family. 

Gotham City Research alleged Wednesday that the online used car retailer, which entered the S&P 500 last month, overstated its 2023-2024 earnings by more than $1 billion, and is “far more dependent on related parties” connected to the family than previously disclosed.

Broadly, the firm accuses Carvana’s earnings of being dependent on DriveTime’s debt issuance, “toxic” loans and accounting irregularities.

Carvana, in an emailed statement, called the report “inaccurate and intentionally misleading.” The company said all of its “related party transactions are accurately disclosed in our financial statements.”

Carvana also reconfirmed plans to release its 2025 earnings on Feb. 18, following Gotham claiming the company would need to delay its 10-K annual filing.

To assist its claims, Gotham published the 2024 audited financials of DriveTime Automotive Group, Inc. and Bridgecrest Acceptance Corp. Both companies are owned by Ernest Garcia II, Carvana’s largest shareholder and the father of the online retailer’s chief executive.