Core Viewpoint - Carvana is navigating scrutiny over its subprime financing but is well-positioned to manage potential losses due to rising used-car prices and resilient securitization structures, maintaining a growth trajectory [1] Financing Exposure - The bankruptcy of subprime lender Tricolor and CarMax's increased reserves have heightened interest in Carvana's financing exposure [2] - Investors are closely examining Carvana's auto loan performance, particularly delinquency and cumulative net loss rates [3] Securitization Analysis - BTIG's analysis indicates that none of Carvana's 14 subprime asset-backed securities (ABS) issuances since 2019 are at risk of impairment, despite cumulative net losses exceeding initial projections by over 500 basis points [4] - Future excess spread income can provide additional credit enhancement to securitizations, mitigating principal loss risks [5] Stress Cases and Resilience - BTIG outlined three stress scenarios indicating resilience, suggesting that even if equity tranches incur losses, their internal rate of return could remain positive [6] - Market access is likely intact even if impairments occur, as other issuers have continued securitizations despite similar credit events [6] Financial Projections - An estimated 13% hit to adjusted EBITDA from increased credit enhancement would still leave Carvana's margins approximately double those of traditional dealers [7] - BTIG projects fiscal year 2025 revenue at $18.97 billion, up from $13.67 billion in fiscal year 2024, and expects further growth to $24.03 billion in fiscal year 2026 [9] Business Model and Market Position - Carvana's vertically integrated model supports growth and profitability despite holding only a 1% share of the used car market [8] - Tariff-driven pricing benefits and expansion into franchise and adjacent markets could enhance Carvana's market reach [8]