Quick Read Carvana (CVNA) shares plunged 15% after Gotham City Research alleged undisclosed related-party transactions inflated earnings by over $1B. Gotham claims DriveTime subsidies fuel over 73% of Carvana’s adjusted EBITDA with leverage at 20x to 40x. Subprime auto loan delinquencies hit 6.74% in December. Carvana derives 26% of gross profit from subprime loan sales. Investors rethink 'hands off' investing and decide to start making real money Carvana (NASDAQ:CVNA) shares had rallied 13% in 202 ...

Core Viewpoint - Carvana is demonstrating resilience on Wall Street despite facing challenges, including a critical short report from Gotham City Research [1] Group 1: Company Performance - Carvana continues to perform well in the online used car retail market, indicating strong operational capabilities [1] - The company is navigating through market pressures and external criticisms effectively [1] Group 2: Market Context - The release of the short report by Gotham City Research highlights ongoing scrutiny and potential volatility in the used car retail sector [1] - The market reaction to Carvana's performance amidst such reports reflects investor sentiment and confidence levels [1]

Group 1 - Microsoft reported a 17% year-over-year revenue growth to $81.3 billion, with a slowdown in cloud business growth; capital expenditures increased by 66% to a record $37.5 billion [1] - Meta's Q4 revenue reached $59.89 billion, with earnings per share of $8.88, driven by strong advertising business; Q1 revenue and full-year capital expenditure guidance exceeded expectations [1] - Tesla's Q4 revenue declined by 3% to $24.9 billion, but operating profit of $1.41 billion and gross margin of 20.1% surpassed expectations; Elon Musk announced the halt of Model S/X production to shift focus to humanoid robot Optimus [1] - IBM's Q4 revenue grew by 12% to $19.69 billion, with cumulative AI business orders exceeding $12.5 billion [1] - Caterpillar's Q4 revenue increased by 18% to $19.13 billion, with adjusted earnings per share of $5.16, both exceeding expectations [1] - Blackstone reported Q4 inflows of $71.48 billion, the highest level in over three years; total assets reached $1.275 trillion [1] Group 2 - Deutsche Bank reported a net profit of €1.3 billion for Q4 and plans to repurchase €1 billion in stock [3] - STMicroelectronics saw a slight recovery in Q4 sales to $3.33 billion, although demand for automotive chips remains weak [3] - Google integrated Gemini AI features into the Chrome browser, introducing tools like Nano Banana and Personal Intelligence [3] - Alphabet's autonomous taxi service Waymo aims to launch a driverless ride-hailing service in London by Q4 [3] - TSMC raised its CoWoS capacity targets for 2026-2027 and is reassessing its advanced packaging expansion plans [3] - Alibaba's Pingtouge launched a high-end AI chip "Zhenwu 810E," which has been deployed in multiple large-scale clusters on Alibaba Cloud [3] - Toyota anticipates a 4.6% year-over-year increase in global sales in 2025, reaching 11.3 million units, setting a new record [3] - Used car retailer Carvana faced a short-sell report from Gotham Research, accused of overstating net profits by over $1 billion [3] - Snap established a wholly-owned subsidiary, Specs, to develop augmented reality (AR) glasses [3]

Core Viewpoint - Carvana Co. is facing a securities fraud investigation triggered by a short seller report, which has led to a stock price drop of over 20% [1] Group 1: Company Overview - Carvana Co. has experienced a significant decline in its stock value, dropping more than 20% following the release of a short seller report [1] - The company is now under investigation for potential securities fraud as a result of the allegations made in the report [1] Group 2: Investor Actions - Investors have been notified to contact BFA Law regarding the situation, indicating potential legal actions or claims related to the stock drop [1]

Core Viewpoint - Gotham City Research issued a short report alleging that Carvana overstated its earnings by more than $1 billion for 2023-2024, leading to a significant drop in its stock price [1][3][4]. Group 1: Allegations and Financial Concerns - Gotham accused Carvana of accounting irregularities and undisclosed related-party transactions, particularly involving entities controlled by the CEO's father [3]. - The report claimed that Carvana manipulates its financials to inflate adjusted EBITDA and questioned the integrity of its reported $550 million net income over the past two years [4]. - Gotham predicted a delayed annual 10-K filing and potential financial restatements, raising concerns about the company's financial reporting [4]. Group 2: Market Response and Analyst Opinions - Despite the short report's impact, Carvana's stock remains up approximately 40% compared to its November low, indicating some resilience [2]. - Analysts from JPMorgan raised their price target for Carvana to $510, viewing the short-seller's claims as outdated and maintaining a bullish outlook on the company [6]. - Carvana's operational efficiency and vertical integration are highlighted as key strengths, suggesting a long-term growth potential with expected revenue growth of 30% this year [5][6]. Group 3: Technical Indicators - Carvana's stock bounced from its 100-day moving average, reinforcing the broader uptrend in its stock performance [7]. - Wall Street analysts continue to support Carvana as a 'Buy' despite the negative short report, indicating confidence in the company's long-term prospects [8].

Core Insights - The consumer discretionary sector has identified oversold stocks, presenting potential buying opportunities for undervalued companies [1] Group 1: Oversold Stocks - The Relative Strength Index (RSI) is a momentum indicator that helps assess stock performance, with an RSI below 30 indicating oversold conditions [1] - A list of major oversold stocks in the consumer discretionary sector includes Kohls Corp, Rush Street Interactive Inc, and Carvana Co, all having an RSI near or below 30 [2] Group 2: Kohls Corp Analysis - Kohls Corp (NYSE: KSS) has an RSI value of 29.6, indicating it is oversold [3] - The stock price of Kohls fell approximately 17% over the past month, reaching a 52-week low of $6.04 [3] - On the latest trading day, Kohls shares closed at $17.22 after a decline of 3.2% [3] - Kohls has an Edge Stock Rating with a momentum score of 86.20 and a value score of 96.75 [3]

Core Viewpoint - The consumer discretionary sector has several oversold stocks that present potential buying opportunities for undervalued companies [1]. Group 1: Oversold Stocks - The Relative Strength Index (RSI) is a momentum indicator used to assess stock performance, with an RSI below 30 indicating that a stock is typically considered oversold [1]. - A list of major oversold stocks in the consumer discretionary sector includes Kohls Corp, Rush Street Interactive Inc, and Carvana Co, all having an RSI near or below 30 [2]. Group 2: Kohls Corp Analysis - Kohls Corp (NYSE: KSS) has an RSI value of 29.6, indicating it is oversold [3]. - The stock price of Kohls fell approximately 17% over the past month, reaching a 52-week low of $6.04 [3]. - On the latest trading day, Kohls shares decreased by 3.2%, closing at $17.22 [3]. - Jefferies analyst Blake Anderson has assigned a Hold rating to Kohls, with an Edge Stock Rating showing a momentum score of 86.20 and a value score of 96.75 [3].

Core Viewpoint - Carvana Co. is facing scrutiny following a report from Gotham City Research alleging significant accounting irregularities and undisclosed related-party transactions, leading to a substantial drop in its stock price [2][3]. Group 1: Investigation Details - Moore Law, PLLC is investigating potential claims against Carvana's officers and directors due to the allegations raised by Gotham City Research [1]. - The stock price of Carvana fell approximately 20% to $376.46 before closing at $410.04 after the report was released [2]. - Gotham's report claims that Carvana overstated its earnings for 2023-2024 by over $1 billion and relied heavily on related-party transactions [3]. Group 2: Financial Implications - The report highlights that DriveTime's financial struggles, including burning through more than $1 billion in cash over 2023 and 2024, significantly impacted Carvana's adjusted EBITDA [3]. - There are concerns regarding a delayed 2025 10-K filing and potential restatements of past annual reports, with auditor Grant Thornton identified as a possible weak link in the financial oversight [3].

Core Viewpoint - Carvana Co. is under investigation for potential violations of federal securities laws due to significant stock price drops linked to claims of accounting improprieties [1][2]. Company Overview - Carvana operates as an online e-commerce platform and used-car retailer, facilitating the buying, selling, and financing of vehicles entirely online. A substantial portion of its revenue is derived from online vehicle sales and auto loans, which are often securitized or sold to external parties [3]. Investigation Details - The investigation by Bleichmar Fonti & Auld LLP focuses on whether Carvana overstated its earnings and improperly accounted for related party transactions [3]. - Gotham City Research LLC released a report alleging that Carvana's financial results are closely tied to a network of related entities controlled by Ernest Garcia II, including DriveTime, Bridgecrest, and GoFi. The report claims that these relationships led to an overstatement of Carvana's earnings by over $1 billion, indicating substantial risks for investors [4]. Stock Performance - Following the release of the Gotham City report, Carvana's stock price fell over 20%, dropping from $474.06 per share at market open on January 28, 2026, to a low of $374.55 per share [5].

Photographer: Angus Mordant/Bloomberg Carvana Co.’s shares fell the most in more than nine months after a short seller alleged the online auto retailer overstated earnings with the help of close ties to businesses controlled by the family of Chief Executive Officer Ernie Garcia III. The report by Gotham City Research alleged that Carvana has not fully disclosed all the benefits it receives from DriveTime, a privately held used-car retailer and subprime lender owned and controlled by Ernie Garcia II, the ...