Core Thesis - Carvana Co. is facing significant structural fragility masked as growth, with its profitability largely driven by financial engineering rather than sustainable operations [2][6]. Financial Performance - As of November 28th, Carvana's share price was $374.50, with trailing and forward P/E ratios of 85.11 and 57.47 respectively [1]. - The company's reported profitability is misleading, with 93% of net income year-to-date 2025 derived from gains on loan sales, while the core business of selling cars remains unprofitable [3]. - Operating cash flow has declined by $252 million year-over-year, and inventory has surged by 44% [4]. Funding and Debt - Carvana has raised $536 million through equity dilution to fund operations, indicating reliance on external financing [4]. - The company carries over $5 billion in debt, much of which consists of Payment-in-Kind notes, inflating obligations and masking cash strain [4]. Regulatory and Legal Risks - Legal and regulatory pressures are intensifying, with state regulators suspending licenses and ongoing securities litigation, potentially exposing the company to hundreds of millions in liabilities [5]. - The company also faces risks from its significant stake in ROOT, which may be used to artificially inflate accounting gains [5]. Management and Agency Risks - The Garcia family controls 84% of voting power and has aggressively sold billions in stock, highlighting severe agency risk and asymmetric incentives [4]. - Carvana's business model transfers risk from insiders to shareholders, relying on continued loan sale gains and favorable credit conditions [6]. Market Perspective - A previous bullish thesis highlighted Carvana's integrated platform and cost efficiencies, with the stock appreciating approximately 16.91% since May 2025 [7]. - The Small Cap Strategist presents a contrarian view, emphasizing the company's structural fragility and regulatory risks [7].