Carvana, the online used car retailer, partnered with Ally Financial to offer financing options to customers. This deal aimed to simplify the car-buying process and provide more financing options to customers.
Carvana customers can now apply for financing directly through the Carvana website, making it easier to purchase a car. The application process is online, and customers can receive a decision in minutes.
Ally Financial provides financing options for Carvana customers, including loans and leases. This partnership allows customers to explore different financing options and find the one that best suits their needs.
Carvana's online platform allows customers to browse and purchase cars from the comfort of their own homes, and now, they can also apply for financing online.
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Carvana Ally Financial Deal
Carvana's deal with Ally Financial is a significant boost to the company's liquidity. Ally has historically bought enough receivables to fund 50% of Carvana's new originations.
This agreement is a renewal of a master agreement that's been in place for years, allowing Carvana to sell up to $4 billion in used-vehicle loan receivables to Ally over the next year.
Carvana's annual revenue is $12.55 billion, and in the recent quarter, it had a net income of $148 million, an operating income of $337 million, and an adjusted EBITDA of $429 million.
The deal effectively doubles Carvana's existing available limit for selling finance receivables to Ally, committing Ally to the purchase of up to $2 billion in finance receivables.
Carvana's stock price has seen stellar growth of 273% over the past 12 months, yet still trades 30% down on recent highs, with a recent 'short report' from Hindenburg fuelling the bear narrative.
JP Morgan has reiterated Carvana's Outperform rating, indicating that any sell off as a result of the short report could represent a buying opportunity.
Carvana's continued agreement with Ally Bank not only strengthens its financial foundation but also reflects its solid market position, with analysts on side and a consensus price target a little over $251.
Carvana packages up some of its receivables into bundles and sells these bundles to third parties through a process called securitization, in addition to selling auto loan receivables to Ally.
Impact on Carvana
Carvana's financial health is in good shape, with an annual revenue of $12.55 billion and a recent net income of $148 million.
The company has seen a 34% year-over-year increase in retail units sold, contributing to a 32% surge in revenue for the third quarter.
Carvana's agreement with Ally Bank has strengthened its financial foundation and reflects its solid market position.
With a consensus price target of over $251, there remains a significant perceived upside of almost 40% from the last trading price.
Analyst firm Baird sees the news as alleviating some concerns on Carvana, with a held Neutral rating and a $250 price target on the stock.
JP Morgan has reiterated the company's Outperform rating, indicating that any sell off could represent a buying opportunity.
The deal allows Carvana to sell up to $4 billion in automotive finance receivables, marking an important milestone for the company.
Carvana's continued agreement with Ally Bank has provided flexibility in closing new car loans, which could translate into relative sales stability during 2020.
The organization won't report on earnings again until May, although it may follow many other companies in reducing or suspending its fiscal 2020 guidance beforehand.
Carvana's pre-coronavirus outlook called for revenue expansion of 42%-47% in fiscal 2020, but management will likely trim this range in the near future.
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