Ernest Garcia II Sells Over $34 Million in Carvana Stock

Ernest Garcia II, a major stakeholder in Carvana Co., has recently divested a significant portion of his shares in the company, as indicated by recent regulatory filings. Over a two-day period, Garcia sold shares totaling approximately $34.4 million, with sale prices ranging from around $167.98 to $175.75.

These transactions were conducted through a pre-arranged Rule 10b5-1 trading plan, which allows company insiders to sell shares at predetermined intervals to mitigate accusations of insider trading. This trading plan was established on March 11, 2024.

The sales consisted of multiple trades, with prices fluctuating on different days. Specifically, on September 23, shares were sold at prices between $167.34 and $176.15. The following day, the sale prices varied from $169.23 to $173.30, aligning with the weighted averages reported in the filings.

Additionally, Garcia converted Class A Common Units of Carvana Group, LLC into Class A shares of Carvana Co., as stipulated in an Exchange Agreement dated April 27, 2017. Importantly, these conversions did not involve any monetary transactions and were recorded with a total value of $0.

Despite this large sale, Garcia continues to hold substantial indirect ownership of Carvana shares through various trusts and entities. Notably, the Ernest Irrevocable 2004 Trust III and the Ernest C. Garcia III Multi-Generational Trust III possess significant amounts of Class A and Class B common stock. Moreover, ECG II SPE, LLC, an entity fully owned and controlled by Garcia, also retains a considerable number of Class B shares.

Investor activity surrounding major shareholders often signals confidence in a company’s future, and Garcia’s recent share sales mark a notable shift in his investment strategy, though the reasons for these sales remain undisclosed.

Carvana has captured investor attention for its disruptive online car buying and selling platform, which poses a challenge to traditional dealerships. Market watchers closely follow the company’s stock performance and ongoing developments.

In other news, Carvana has garnered attention from analysts after reporting strong second-quarter results. BofA Securities reinstated its Buy rating on the stock, emphasizing the potential for significant long-term growth within the $800 billion used car market. Similarly, Evercore ISI raised its price target for Carvana, citing improved lending practices and increased website traffic.

Stephens initiated coverage on Carvana with an Overweight rating, forecasting positive EBITDA for the company by the end of the year, supported by its innovative approach to the used vehicle market. Jefferies also raised its price target, noting the company’s plans for strategic capacity growth.

Meanwhile, BNP Paribas Exane maintained a Neutral stance on Carvana shares, considering the existing auto financing environment and the implications of potential stricter credit standards by Ally Financial, although no immediate concerns regarding a slowdown were suggested.

Carvana’s management has projected third-quarter unit sales to surpass those in the second quarter, indicating over 25% year-over-year growth. For 2024, the company estimates EBITDA between $1 billion and $1.2 billion, exceeding the consensus estimate of $890 million. These developments highlight Carvana’s resilience in a constantly evolving marketplace.