Bluechip
Value Investor, Short Seller
Carvana and Credit Acceptance face repossessions and charge-offs next as 90-day auto loan delinquencies surge, even with the economy booming. Consumer stress is broader too: per @GunjanJS, 13.12% of credit-card balances were at least 90 days delinquent in Q1, the highest in 15 years and the most since the aftermath of the 2008 financial crisis. x.comÂ
Subprime auto loans continue to hold up, yet Carvana still looks weak. 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
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
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
Capital One is making the same argument for subprime auto loans that was made for mortgages in 2007. It says it is not worried about lending to subprime borrowers because repayment terms can stretch to 10 years, lowering payment-to-income ratios so low-wage consumers can afford $100k vehicles. 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
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
Credit Acceptance's 20% jump in two weeks and nearly 50% gain this year make little sense after a CFO change and rapid insider selling, which makes it a tempting short up here. Its float dynamics are tougher than one would want for a short. x.comÂ
Affirm's claim of a resilient consumer rings hollow because its model offers little visibility into credit risk. Like mortgage underwriters before the housing collapse, it originates and sells the loans, so it bears little risk itself. BNPL is opaque, with payments not reported to credit agencies; a survey found 41% of buyers made late BNPL payments over 12 months, against a reported 1.2% 30-day delinquency rate. Fitch assumes a 4% default rate because it is not given pool delinquency data. … Show more
Pagaya's 8.875% 2030 senior notes are the best self-help credit among the high-yield bonds reviewed, still priced far outside normal B risk at about 71.5 despite real liability improvements. Pagaya refinanced a costlier term loan, cutting about $40M a year of cash interest, and repriced its revolver. 2025 adjusted EBITDA rose 76% to $371M, with $410-460M guided for 2026, and ABS access held up. The bond needs genuine rerating, and Pagaya stays tied to consumer-credit and securitization risk. … Show more