Carvana (CVNA) stock has fallen for the second day in a row after short sellers issued a negative report about the company yesterday. Currently, CVNA stock is returning 5%.
Carvana specializes in helping consumers buy cars online.
A car warehouse packed with newly purchased used cars.
negative report
Hindenburg, which has established a short position in CVNA stock, says the retailer has overly lax underwriting standards for the loans it offers to car buyers. In fact, the company’s former directors approved every loan application the company received, Hindenburg claimed. Short sellers predicted that auto retailers’ ability to sell these loans would weaken over time.
Additionally, Carvana is improving its business by selling vehicles at higher prices to a car dealership called DriveTime, which is owned by the CEO’s father, Hindenburg reported. Finally, Hindenburg said DriveTime, which services some of Carvana’s loans, extends many of these contracts and offers Carvana very favorable terms for extended warranties.
Mr Calvana denies the allegations
In response to Hindenburg’s accusations, Carvana wrote, “The arguments in today’s report are intentionally misleading and inaccurate, and have already been made numerous times by other short sellers.”
Recent performance of CVNA stock
Carvana stock has fallen 24% in the last month, but is still up 300% in the past 12 months.
While we see CVNA’s potential, we believe some AI stocks have a better chance of delivering higher returns over shorter time periods. If you’re looking for AI stocks that have more promise than CVNA but trade at less than 5x earnings, check out our report on the cheapest AI stocks. Also read: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks to Buy Now, According to BlackRock Disclosure: None. This article was originally published on Insider Monkey.
