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Carvana Faces Investigations Amid Allegations of Overstated Earnings

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
Updated 2/19/2026, 9:19 am ET 2/19/2026, 9:19 am ET | 4 min 4 min read
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Carvana Co. stocks have been trading down by -6.04 percent due to sell-off pressures amid shift in market sentiment.

  • A collection of law firms have announced investigations into potential securities law violations following a steep decline in stock prices of the company.

  • The reported earnings are suggested to have been overstated by over $1 billion, leading to significant market impacts and potential restatements.

  • These ongoing investigations have driven the stock prices down with some reports indicating a decline of over 20%.

Candlestick Chart

Live Update At 09:18:25 EST: On Thursday, February 19, 2026 Carvana Co. stock [NYSE: CVNA] is trending down by -6.04%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Quick Financial Overview

Recently, Carvana released its earnings report showing $13.67B in revenue with a profit margin of 5.09%. However, the company faces liquidity concerns. Their total debt-to-equity ratio stands at 2.46, indicating substantial debt in relation to equity capital. On the positive side, its current ratio is a solid 4.1, signifying the firm’s strong capability to cover short-term liabilities.

In recent trading sessions, the stock’s performance reflects volatility with a notable drop in share value. According to the recent intraday data, share peak movements indicate a fluctuating pattern, suggesting a challenging time for the company stocks against significant market forces.

Investigations and Market Reactions

The core focus recently has been on multiple ongoing investigations involving Carvana. These probes have stemmed from Gotham City Research’s report, which alleged earnings were overstated by over $1 billion. This revelation has sparked a landslide of concerns among investors.

Bleichmar Fonti & Auld LLP is investigating the company over potential violations of federal securities laws. The reported earnings overstatement supposedly ties to undisclosed transactions and debts linked with related party entities. As a result, this scandal has knocked over 20% off the company’s stock price at certain points in trading.

Further turmoil stems from a class-action investigation initiated by several law firms. These actions have prompted discussions on the transparency of Carvana’s financial communications to the investing public. It seems these revelations have rattled investor confidence, compounded by alleged improprieties mentioned in the Gotham City Research report.

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Conclusion

Overall, the recent news sheds light on significant challenges faced by Carvana. From financial scrutiny by leading law firms to fluctuations in market perception, the company is navigating tumultuous waters. Traders seem wary as ongoing investigations threaten to destabilize market confidence further. Notably, if the allegations are substantiated, this could imply hefty restatements, fines, or more adverse legal consequences. As millionaire penny stock trader and teacher Tim Sykes, says, “It’s not about how much money you make; it’s about how much money you keep.” The sentiment among traders highlights the importance of maintaining financial prudence, especially amidst such tumultuous conditions.

With the altered financial narratives and intricate web of transactions under the microscope, Carvana’s path forward demands strategic response and assurance of financial transparency to restore faith among shareholders. Ensuring compliance and tackling these legal battles head-on could potentially stabilize the stock downtrend and foster renewed trader confidence.

This is stock news, not investment advice. Timothy Sykes News delivers real-time stock market news focused on key catalysts driving short-term price movements. Our content is tailored for active traders and investors seeking to capitalize on rapid price fluctuations, particularly in volatile sectors like penny stocks. Readers come to us for detailed coverage on earnings reports, mergers, FDA approvals, new contracts, and unusual trading volumes that can trigger significant short-term price action. Some users utilize our news to explain sudden stock movements, while others rely on it for diligent research into potential investment opportunities.

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Tim Sykes

Head Writer at TimothySykes.com, Lead Mentor at the Trading Challenge
In his 20-plus years of trading, Tim has made $7.9 million. In his 15-plus years of teaching, Tim’s Trading Challenge has produced over 30 millionaire students. His philosophy emphasizes small gains and cutting losses quickly.
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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”