Carvana's (CVNA) new non-prime asset-backed securities deal has reassured investors but the smaller deal size and limited loan seasoning indicate that the company sold non-prime loans through other channels rather than delaying sales to Q1 2025, Wedbush said in a note on Thursday.

The firm said that while non-prime loans sold outside asset-backed securities channels generally have lower margins, the downside risk to Carvana's Q4 other gross profit per unit, or GPU, is minimal because consensus estimates have already adjusted downward, and stronger-than-expected retail GPU should offset any weakness.

Wedbush said that compared with Q3 and Q4, "Q1 2025 should have a seasonally higher mix of non-prime loan sales that have higher margins than prime loan sales, so pressure from compression in spreads could be muted by favorable mix."

The firm said that the new deal features slightly better loan quality, including higher borrower credit scores and lower interest rates, while the overall portfolio remains mixed and that lower interest rates combined with higher benchmark rates may lead to lower excess spreads.

Wedbush has a neutral rating on Carvana's stock with a price target of $250.

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