ACVA

ACV Auctions ($ACVA) Directors Purchase $625K at Bottom Following 43% Crash

01/20/2026 03:48

ACV Auctions ($ACVA) shares plunged 43% in a single day on November 6, 2025, crashing to $5.09 after the company disclosed a $19 million loss from a customer bankruptcy. The $1.5 billion market cap digital used vehicle marketplace operator saw its stock collapse from a 2024 peak of around $23, erasing over 65% of shareholder value. Yet immediately following the crash, two board directors committed $625,000 to purchase shares at the bottom, signaling potential insider confidence that the market overreacted. ACV Auctions operates a digital marketplace where dealers buy and sell used vehicles, providing vehicle condition data and valuation services. Major dealership groups including Mercedes-Benz, Volkswagen franchises participate as customers, and the company has expanded into transportation, financing, and assurance services. However, a customer of ACV Capital, the company's financing subsidiary, filed for Chapter 7 bankruptcy protection in September 2025, triggering the massive loss that materialized in Q3 results. On November 14 and 17, director Brian Hirsch purchased $500,000 worth of shares (80,571 shares at $6.21), while director Kirsten Castillo bought $125,000 worth (20,000 shares at $6.26-6.27). These purchases came right at the historic low, suggesting management believes the market reaction was excessive. Hirsch's $500,000 single-transaction purchase at a point where the stock had fallen over 70% from its 2024 high demonstrates strong conviction. Yet prior executive behavior told a different story. CEO George Chamoun sold approximately $5.88 million worth of shares (350,000 shares) in June 2025 when the stock traded in the $16-17 range. CSO Michael Waterman sold $1.87 million in March, $371,000 in June, and $551,000 in July 2025, exiting at much higher prices before the collapse. This raises questions about whether insiders anticipated the crisis. Financially, results show mixed signals. Q3 2025 revenue reached $199.56 million, up 16.5% year-over-year but missing analyst expectations of $200.26 million. EPS came in at $0.07, marking the first profitable quarter after a string of losses, demonstrating ACV is on a path toward profitability. However, adjusted EBITDA of $19 million fell short of expectations, and Q4 revenue guidance of $180-184 million was lowered, raising growth deceleration concerns. The critical blow was the realization of customer credit risk. The $19 million loss from the ACV Capital customer bankruptcy equaled the entire Q3 adjusted EBITDA, effectively wiping out operational profits. As the used vehicle market contracts, the credit risk management failure convinced investors that ACV's business model has structural vulnerabilities. BofA Global Research downgraded the stock to underperform with a $6 price target, roughly matching current levels. Despite this, the majority of the analyst community remains optimistic. Eleven of 14 brokerages maintain buy or higher ratings, with a median price target of $15.35, implying approximately 75% upside from current levels. This suggests the market overreacted to a short-term crisis while ACV's long-term growth story remains intact. JP Morgan upgraded the stock to overweight in June 2024, and Needham raised its price target to $28 in December 2024, citing commercial auction market expansion and Q4/FY25 demand increases. Investors should focus on clear decision criteria. First, the Q4 earnings report scheduled for February 18, 2026, must show no additional customer bankruptcies or credit losses. Second, the company must demonstrate credible progress toward the 2026 EPS estimate of $0.42, which would represent a dramatic turnaround from 2025's -$0.43 EPS. Third, the dealer wholesale used vehicle market must show stabilization signs from its mid-single-digit decline. Fourth, marketplace services adoption rates must continue rising, improving per-transaction profitability. Conversely, the investment thesis breaks down if additional large customer bankruptcies occur, Q4 revenue falls below the $180 million guidance floor, economic recession causes dealer inventory pressures and auction participation to plummet, or if funding costs rise requiring dilutive capital raises. Scenario analysis reveals three paths. The bull case assumes the bankruptcy was a one-time event, 2026 profitability exceeds guidance, and shares recover to $15-20, vindicating insider buying. The base case sees the used vehicle market remaining weak through H1 2026 but stabilizing in H2, with shares trading in the $10-12 range. The bear case involves additional credit losses, continued revenue declines, and shares falling below $5 with delisting risk emerging. Short-term (1-6 months), expect volatility in the $7-9 range until February earnings. Positive results without additional negative surprises could spark a rebound to $10-12, while disappointing guidance could trigger a retest of the $5-6 lows. High volatility creates short-term trading opportunities but also substantial downside risk. Long-term (6+ months), ACV's fate hinges on two factors: used vehicle market recovery and successful credit risk management overhaul plus commercial auction expansion. US consumer confidence fell 24.7% year-over-year to 54.0 in January 2025, making demand recovery timing uncertain. The Fed's expected rate cuts in 2026 may help but with a lag. If both factors materialize, shares could reach $15-20 by late 2026/2027. Failure of either constrains long-term investment value. ACV Auctions represents a high-risk, high-reward contrarian opportunity at historic lows with insider buying. The $625,000 director purchases signal strong conviction, but prior CEO/executive selling totaling millions suggests internal disagreement about prospects. The first profitable quarter and 16.5% revenue growth demonstrate business model viability, but the $19 million bankruptcy loss exposed credit risk management weaknesses. The analyst median price target of $15.35 is attractive, but achieving it requires proving 2026 profitability improvement without additional negative surprises. Worth considering for investors with 2-3 year horizons who can tolerate volatility, but caution advised for short-term or risk-averse investors.