2025 didn't necessarily start out well for sprawling vehicle retailer Carvana's (CVNA +2.87%) stock, but it's recovered quite well in recent days. A clutch of analysts following the company didn't hesitate to defend it after a short-seller issued a highly critical report, with two even upgrading their recommendations.
These factors had a positive effect on investor sentiment, and Carvana shares ended the week 9% higher in price, according to data compiled by S&P Global Market Intelligence.
A short-seller attacks
That short-seller report came from Hindenburg Research, which is known for its scathing takes on companies it deems worthy of heavy criticism. Hindenburg's feelings for Carvana were made clear by the report's incendiary title -- "Carvana: A Father-Son Accounting Grift For the Ages" (referring to current CEO Ernie Garcia III and his father Ernest Garcia II).
Hindenburg made a clutch of fairly heavy accusations against Carvana and its management. The short-seller claimed that more than one-quarter of the company's gross profit comprised sales of client auto loans to third-party entities, among other transgressions.
That didn't jibe with several analysts tracking the stock, and they wasted little time defending the company. Needham's Chris Pierce and JPMorgan Chase pundit Rajat Gupta both published updates reiterating their equivalents of buy recommendations on the stock.
NYSE: CVNA
Key Data Points
Keep an eye on speed limits
Going one step further, both RBC Capital and Citigroup upgraded their recommendations to their versions of buy following Carvana stock's beatdown. According to reports, Citigroup's Ronald Josey feels that the company is being effective in expanding its inventory to meet the current demands of the market.
While the stock might have been unfairly punished by Hindenburg Research -- which, we should keep in mind, stands to gain if its assertions ultimately drive the share price down -- Carvana is operating in a market that's currently challenging. Investors should exercise care, particularly since this can be a volatile stock.
