Bluechip
Value Investor, Short Seller
Carvana's rising costs and falling loan-sale gains leave volume growth without operating leverage. Ad spending rose to $152M from $121M last quarter, and $3.45B of inventory enters a seasonally weak quarter. Gain on sale fell less than expected; it still tops $2,000 upfront on a roughly $25,000 car, but the chart uses all retail units, not just financed ones. The after-hours rise should fade, and an ABS-market freeze would make those gains irrelevant. x.com x.com x.com x.comÂ
Higher rates and seasonality weigh on Morgan Stanley's Carvana Other GPU estimates. It models $2,565 in Q3, down $100 sequentially, and $2,450 in Q4, below published Street estimates, though it still expects Q4 EBITDA per unit to grow year over year. Carvana should sell over 215,000 retail units in Q3 versus roughly 206,000 consensus, but results depend on whether Mark Walter was able to buy its ABS. x.com x.com x.comÂ
Carvana faces a tough road ahead based on its earnings and management commentary. Anyone expecting 30%+ growth for a while could be surprised within a few quarters by major deceleration and margin pressure. x.comÂ
Carvana is headed back below $2 next year as 2027 becomes the year of blowups, when misallocated capital gets punished. A nasty head-and-shoulders pattern on the long-term chart adds technical evidence. x.comÂ
Carvana's clean Q1 beat in a strained consumer environment is reassuring, but collapsing free cash flow is the number the bear case lives in. Revenue rose 52% to $6.43B and adjusted EBITDA of $672M beat, with SG&A per unit down 7.8% and retail GPU recovering from Q4 reconditioning issues; full-year EBITDA estimates rise to about $2.9B. Free cash flow fell 73% to $56M versus a $157M estimate, pointing to inventory build or rising financing costs. Q2 retail GPU faces headwinds. x.comÂ
Subprime auto loans continue to hold up, yet Carvana still looks weak. x.comÂ
CarMax's turnaround is still unfolding, and the latest quarter reinforced it. Used retail unit sales rose 9%, the $200M SG&A savings target is on track, CarMax Auto Finance penetration is growing, and about $35 per vehicle of EPP profit uplift is expected by FY27; management says it has turned the corner. At about 17x forward earnings, the stock still trades below its 20.8x historical average despite improving fundamentals, so the buy-up-to price is being raised. x.comÂ
Carvana has completed one of the most impressive turnarounds in recent memory, and the market is underestimating the runway ahead. It sold a record 187K retail units, posted a record $672M of adjusted EBITDA and cut net leverage to 1.1x, while AI-powered reconditioning tools are already lifting labor efficiency. x.comÂ
Large-cap banks such as JPMorgan and Carvana are exposed to a coming credit crisis that war headlines are distracting investors from. The private debt market keeps imploding, and troubles at JPMorgan, Morgan Stanley, BlackRock and Deutsche Bank are symptoms of a broad debt-market problem. More esoteric debt such as subprime auto loans is likely to come under scrutiny next, which is why the short positions remain. x.comÂ
Copart is a Strong Buy at 52-week lows, with Jay Adair's return and the planned ACV acquisition giving reasons to watch for a recovery. Its online auctions sit on a hard-to-replicate network of vehicle yards, a junkyard tollbooth hiding in plain sight, and the stock trades at about 17.6x earnings versus a historical 26.9x. Growth has slowed; the thesis depends on volume recovering and ACV expanding the opportunity. x.com x.comÂ
