Carvana, Robinhood, and Coinbase, which were on the brink of bankruptcy in 2022, achieved full profitability in 2024 and were subsequently included in the S&P 500 Index after implementing stringent cost-cutting measures and strategic transformations. This turnaround not only signifies the renewed mainstream acceptance of their business models but has also inflicted substantial losses on investors who had heavily shorted these stocks, underscoring the dramatic rotations within the market amid macroeconomic cycles.
In 2022, $Carvana (CVNA.US)$ 、 $Robinhood (HOOD.US)$ and $Coinbase (COIN.US)$ these companies, once emblematic of stock price collapses due to surging interest rates, high inflation, and an industry downturn, have now completed a remarkable turnaround. Not only have they repaired their balance sheets, but they have also all been included in the S&P 500 Index, ascending from their previous status as 'bankruptcy candidates' to become core assets of the U.S. stock market.
According to Yahoo Finance, used car retailer Carvana has been confirmed to officially join the S&P 500 Index later this month, completing an extraordinary feat of rising up to 11,000% from its low point. Prior to this, cryptocurrency exchange Coinbase and brokerage firm Robinhood had already been incorporated into the benchmark index in May and September of this year, respectively.
This series of inclusions marks a significant shift in market sentiment: these three companies, which suffered severe blows during the depths of the 2022 bear market and even faced near-collapse, are now among the strongest-performing stocks in the index.
This dramatic recovery is primarily attributed to the companies’ strategic transition from aggressive expansion to profit-oriented operations. According to the inclusion criteria for the S&P 500 Index, companies must achieve profitability over the most recent four quarters and meet a certain market capitalization threshold (e.g., Robinhood needed to exceed $22.7 billion at the time of its inclusion).
To overcome this hurdle, the aforementioned companies underwent stringent cost-cutting measures and adjustments to executive compensation over the past two years, eventually turning profitable in 2024. This not only inflicted heavy losses on short-sellers who had bet on their collapse but also restored institutional investors' confidence in the sustainability of their business models.
With Carvana set to complete its inclusion in the S&P 500, these three companies, which were severely impacted by macroeconomic headwinds, have officially completed their return to Wall Street's mainstream. Below is a detailed account of how they achieved rebirth through operational adjustments, capitalizing on favorable market trends, and repairing their balance sheets.
Carvana: From the Brink of Bankruptcy to a Nightmare for Short-Sellers
Few stock reversals can rival the dramatic nature of Carvana’s comeback. In 2022, despite the company selling more than double the number of cars compared to 2019, its annual losses surged to nearly $2.9 billion, ending an eight-year trend of margin growth. Its stock price plummeted 98%, falling below $4 per share, bringing it to the brink of bankruptcy and prompting Morgan Stanley analyst Adam Jonas to warn that the stock could drop to $0.10.
However, through a series of debt restructurings and operational efficiency improvements, Carvana successfully turned profitable. The company not only achieved its first annual profit in 2024 but also set new records for revenue and gross profit per vehicle earlier this year. With the improvement in fundamentals, its stock price has staged an astonishing rebound, inflicting heavy losses on investors who had aggressively shorted the stock.
Ihor Dusaniwsky, Managing Director of S3 Partners, told the media that since hitting historical lows in 2022, short-sellers of CVNA have incurred losses totaling $8.44 billion, experiencing a 'short squeeze more terrifying than a hurricane.'
Currently, the market's perception of Carvana has undergone a fundamental shift. The company's CEO and Chairman, Ernie Garcia, stated: 'For a team to endure the kind of pressure we faced over the past two years without falling apart is extremely challenging, but we did not fall apart.'
Adam Jonas, who was previously bearish, upgraded his rating to 'Overweight' in May and projected that Carvana’s market share in the used car market would grow from the current 1.5% to 12% by 2040, potentially positioning the company to become the 'Amazon' of automobile retailing.
Robinhood: Founders Forgo Bonuses for Comprehensive Profitability
As a symbol of the 2021 retail investor-driven stock surge, the trading platform Robinhood also experienced its darkest period in 2022, with its stock price plummeting to around $7 amid acquisition rumors and large-scale layoffs. To save the company, founders Vlad Tenev and Baiju Bhatt agreed to forgo their respective $500 million bonus contracts, helping conserve funds and expedite profitability.
This extreme cost-control strategy yielded significant results. Data shows that despite a 25% decline in Robinhood’s revenue in 2022, its operating expenses dropped sharply by 31%. This financial discipline enabled the company to surpass the S&P 500 index’s profitability threshold—achieving profits across the last four quarters. In 2024, Robinhood achieved its first full-year profit, ending three consecutive years of losses.
Since being added to the S&P 500 index in September this year, Robinhood’s stock price has made a strong comeback, surging approximately 1450% from its 2022 low, making it one of the fourth-best performing stocks in the index for the year.
Citizens analyst Devin Ryan noted that the company has gradually matured, not only understanding the requirements of institutional investors but also achieving high levels of profitability. Additionally, the company is further expanding its growth potential through its 'super app' strategy, which includes new features such as tokenized stocks and prediction markets, and even plans to host a 'Trump account' proposed by the newly elected U.S. President.
Coinbase: A Turning Point for Fintech Platforms and Revenue Growth
Coinbase was the first of the three companies to enter the S&P 500 index earlier this May, marking a dual turning point in regulatory environment and market position for a company that had previously faced intense scrutiny from the U.S. Securities and Exchange Commission (SEC) over securities law issues.
Strong financial data supported this status. Driven by a recovery in trading volumes, Coinbase’s revenue in the third quarter of this year surged 54% to $1.87 billion, with net earnings per share jumping from $0.28 to $1.50 compared to the same period last year. Consumer trading volume on the platform also grew 37% quarter-over-quarter, reaching $59 billion.
Citizens analyst Ryan compared Coinbase to 'the AWS of the blockchain space,' noting that it serves not only retail users but has also built deep competitive moats by providing infrastructure to institutional clients. Additionally, the stablecoin legislation passed this summer and Wall Street's anticipation of the future Market Structure Transparency Act are regarded as the next major catalysts for the industry and Coinbase's stock price.
Editor /rice
