• Famed short-seller Jim Chanos reasserts his negative outlook on Carvana, citing numerous concerns.
  • The stock extended its decline, dropping approximately 11% in a single session amid the comments.
  • Heavy insider selling by executives, totaling over $828 million in recent months, continues to weigh on investor sentiment.

Carvana Co. shares accelerated their downward trajectory Thursday after prominent short-seller Jim Chanos publicly reiterated his bearish stance on the online used-car retailer, pointing to "lots of red flags" with the company. The stock fell to a session low, extending a recent decline that has now reached roughly 11%.

The sell-off coincides with broader concerns about weakening consumer confidence and persistent insider selling by Carvana's top executives. According to recent filings, the company's CFO, COO, and other senior leaders have offloaded shares worth more than $828 million over the past three months, a move that has unsettled some investors.

"When you see that level of insider selling, it raises legitimate questions about management's confidence in the current valuation," said one portfolio manager who asked not to be named because they are not authorized to speak publicly. The selling occurred even as the stock had staged a dramatic recovery, climbing 65% year-to-date and 71% over the past twelve months before this recent pullback.

Chanos, founder of Chanos & Co., is known for his prescient short positions on companies like Enron. His continued skepticism presents a significant headwind for Carvana as it attempts to maintain its growth narrative. Efforts to reach Carvana for comment on Chanos's remarks were not immediately successful.

The company now faces a critical test with its upcoming third-quarter earnings report scheduled for October 29. Analyst consensus projects earnings per share of $1.29, a more than 100% increase year-over-year, on revenue of $4.91 billion. For the full fiscal year, expectations are for EPS of $5.10 and revenue approaching $19 billion.

Despite these robust growth projections, the capital-intensive nature of Carvana's business model and its sensitivity to macroeconomic swings remain key concerns. A recent downturn in consumer confidence, attributed to worries over inflation and a softening job market, could particularly impact demand for big-ticket discretionary items like used vehicles.

Without a sustained recovery in consumer spending power, the company's aggressive growth targets could prove challenging to meet. The upcoming earnings call will be closely watched for any commentary on demand trends and the impact of economic conditions on their operational outlook.

Correction: An earlier version of this article misstated the percentage decline in Carvana's stock; it fell approximately 11% in the session discussed.