Carvana: from meme-stock to real business?

Carvana trades at roughly $68B after this week's earnings drop.

In case you don't know, Carvana is the largest online-only used car retailer in the United States. They are now the fastest-growing and most profitable large auto retailer.

But it always hasn't been rosey

You could have bought Carvana in late-2022 for about $0.76. The stock is now $62

And the stock is still not nearly as high as it was before the crash in early 2021. The stock was up to about $370 per share back then.

What caused the crash?

Carvana was definitely a meme stock during that meme era. In 2022, bloated, high-cost inventory, collapsing used car prices, and operating losses of over $1.4 billion led to net debt ballooning from $1.45 billion in 2020 to $8 billion, with only $434 million in cash left at year-end.

Creditors holding the $4B in debt signed a cooperation pact and bankruptcy was the consensus call. I remember during this time hearing other flankers say Carvana was going to zero, which I agreed with.

The Pivot

Then Carvana miraculously pulled out of the death spiral. In July 2023, Carvana pulled off what one advisor called "the most successful bond exchange ever."

They were able to swap 96% of $5.7B in unsecured notes into secured debt, avoiding bankruptcy altogether.

The exchange cut total debt by over 1.3 billion, extended maturities, and paired with a three-step plan for positive EBITDA, then positive unit economics, then profitable growth.

Massive cost cuts followed, obviously.

But! This seems to have worked. In 2025, they reported full-year net income of $1.9B. Carvana got into the SP500.

They did have some major tailwinds, though. Tariffs on new cars pushed buyers into the used market.

The business is also quietly pivoting. Carvana has quietly bought seven Stellantis franchise dealerships since early 2025. The stores function as service and test drive hubs, while purchases stay online.

They're still sus af

In January of 2025, Hindenburg Research released a research article called "Carvana: A Father-Son Accounting Grift For The Ages"

In this post, they call Carvana's turnaround a mirage. They claim that their research uncovered $800 million in loan sales to a suspected undisclosed-related party.

All while insiders cash out billions in stock. And this is exactly what happened before the last crash: Carvana CEO Ernie Garcia III’s father, Ernest Garcia II, sold $3.6 billion in stock between August 2020 and August 2021. In the year after he stopped selling, Carvana’s stock plunged 99% and faced bankruptcy concerns shortly thereafter.

Hindenburg claims, "since 2023 we see the same trend: Carvana has touted a bright future and posted three consecutive quarters of modest positive net income, an aggregate of $245 million, despite stress in the used auto market."

And daddy is selling again. Eanest Garcia has sold another $1.4B in stock.

Oh, and by the way, he's been in hot water before. He has previously pled guilty to felony bank fraud over allegations that he helped a company report fake accounting income through sham transactions.

Yikes. Yeah, that report alone is making me stay far away from this company. Not interested.

Sentiment: Bearish