Carvana stock defended at BTIG amid DriveTime allegations

Investing.com -- Carvana shares came under heavy pressure on Wednesday following newly circulated allegations tied to the online retailer’s relationship with DriveTime, but BTIG pushed back strongly, arguing that the most serious claims lack foundation.

In a new note, analyst Marvin Fong said the market appears to be giving undue weight to accusations emerging after DriveTime’s 2024 10-K was obtained via a Freedom of Information Act request linked to a class-action lawsuit.

BTIG stressed that “the most serious ones are not well-founded,” adding that these core allegations “underpin many other assertions being made.”

The firm “disagrees with the DriveTime leverage calculation,” noting that claims of 20–40 times leverage misinterpret how securitized assets appear on DriveTime’s balance sheet.

Because its Bridgecrest unit consolidates bankruptcy-remote trusts, BTIG said the allegations “incorrectly” treat securitizations as recourse debt.

Adjusted properly, BTIG calculates 2024 Adjusted EBITDA of $99 million against $511 million of warehouse debt, “much more manageable” than alleged.

The firm also “disagrees with the servicing fee calculation,” saying critics understated receivables linked to Ally and Purchaser trusts, which made the implied third-party servicing fee appear artificially low.

BTIG further rejected suggestions of a roughly $900 million loan write-down, calling the logic “incorrect” because year-end fair values reflect cumulative loan activity, not a single year’s originations.

Finally, BTIG dismissed attempts to use cash flow from operations as a proxy for P&L metrics, arguing that CFO “is affected by many things” and cannot be mapped to earnings.

BTIG reiterated its Buy rating and $535 price target on CVNA, saying its estimates “are not under review at this time.”

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