CVNA - Why Carvana Stock Ripped 38% Higher This Week
2023-06-02 17:23:56 ET
Shares of online used car marketplace Carvana (NYSE: CVNA) soared as much as 38% this week, according to data from S&P Global Market Intelligence . The company got a credit upgrade on its auto loan securitizations and launched a new national advertising campaign. Investors likely took these as positive signs for the company, one that looked to be at major risk of bankruptcy to start 2023. As of this writing, shares of Carvana are up 33% this week and an astonishing 240% year to date.
Carvana's business model is buying and selling used cars on its marketplace, facilitating transactions between consumers and wholesale purchasers. When someone buys a car from Carvana, it will originate an automotive loan for them (as you likely know, the majority of car purchases are funded with debt). However, instead of keeping these loans on its balance sheet, Carvana packages up its loans and sells them to third-party financiers.
There have been rumblings in recent quarters about the credit quality of the loan securitizations, which caused S&P Global to downgrade its credit ratings. Underperforming loans wouldn't immediately impact Carvana, but they have the potential to ruin its relationship with its financing partners, an important piece of its business model.
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Why Carvana Stock Ripped 38% Higher This Week