We came across a
bearish thesis on Carvana Co. on Nemonomics’s Substack by Nick Nemeth. In this article, we will summarize the bulls’ thesis on CVNA. Carvana Co.'s share was trading at $347.56 as of August 8
th. CVNA’s trailing and forward P/E were 86.46 and 69.44, respectively according to Yahoo Finance.
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sonyae / 123RF Stock Photo
Carvana (CVNA) has surged from near-bankruptcy to a $45+ billion market cap on strong earnings, but its valuation appears disconnected from its fundamentals. Despite being branded as an online used-car dealer, its true profit engine is consumer finance, not vehicle sales. The company originates loans, packages them, and sells them at a premium, with tiny “metal margins” of $400–$500 per car. In 2024, it sold $6.15 billion in loans, generating $541 million in gain-on-sale income, or 26% of gross profit. Most financing flows through Bridgecrest, serving lower-credit borrowers with average FICO scores in the 567–584 range, which allows for higher rates but comes with elevated delinquency risk.
Nearly 80% of customers finance through Carvana, with loans often securitized and sold, while retaining roughly 5% exposure. The business model’s fortunes are tied to credit cycles—when credit weakens, loan buyers retreat, volumes collapse, and balance sheet risk rises, as seen in 2021–22. Unlike brick-and-mortar dealers, Carvana cannot fully capture lucrative service, warranty, and insurance revenue streams, which remain a major profit driver for peers trading at far lower multiples.
Competitors like AutoNation, with steady profitability and broader revenue streams, are valued at a fraction of Carvana’s market cap. With a price-to-book ratio near 30, investors are paying tech-like multiples for a leveraged finance operation heavily exposed to subprime auto credit and securitization markets. Without a defensible moat, Carvana’s valuation hinges on sustained credit market strength, making the risk/reward profile skewed sharply if macro or credit conditions deteriorate.
Previously, we covered a
bullish thesis on Carvana Co. (CVNA) by Investing City in May 2025, highlighting its integrated e-commerce platform and operational efficiencies. The stock has risen about 8.5% since, as optimism outweighed macro risks. The thesis still stands on execution strength. Nick Nemeth shares a contrarian view, focusing on Carvana’s reliance on subprime auto finance and credit cycles.
Carvana Co. is not on our list of the
30 Most Popular Stocks Among Hedge Funds. As per our database, 90 hedge fund portfolios held CVNA at the end of the first quarter which was 84 in the previous quarter. While we acknowledge the potential of CVNA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the
best short-term AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. 
