Carvana Stock Jumps 50% After Outlook Update, Heavily Shorted

(CTN News) – It was reported on Thursday that Carvana (CVNA) stock was up as much as 50% after the online car retailer updated its outlook following months of aggressive cost-cutting.

This Tempe, Arizona-based company has announced that it expects to achieve a second quarter adjusted EBITDA above $50 million, which is expected to occur in the second quarter of 2023.

At the beginning of this year, Carvana had indicated that it would reach positive adjusted earnings in Q2 but had not provided an exact amount.

In addition, Carvana expects that its non-GAAP total gross profit per vehicle will rise above $6,000 for this quarter, which will be a new record for the company and an improvement of over 63% from the same quarter last year.

As a result of the team’s consistent focus on driving profitability, we have been able to achieve significant cost savings and efficiencies, and we will continue to do so in order to execute our plan,” said CEO Ernie Garcia in a statement.

As of today, shares of the online car retailer have gained more than 300% year-to-date amid rallying reminiscent of the “meme craze” of the pandemic era.

The short interest in Carvana’s shares is very high, with short interest hovering around 65% of the float at the time of writing.

As a result, short sellers have been betting that the stock price will go down in the future. It can also cause them to cover their positions by buying back the stock in the event it rises on the heels of a headline. When this happens, it creates a situation that is known as a short squeeze.

It was once a darling among pandemic darlings, but last year, the company laid off workers in an effort to cut costs and conserve cash.

In spite of higher interest rates, the used car industry, which experienced record-high inflation in 2022, has seen prices soften this year amid rising inflation.

Last year, Carvana’s stock fell due to bankruptcy fears.

As Douglas Arthur, managing director at Huber Research Partners, said earlier this year in a Yahoo Finance article, “The equity market has been largely shut down, and the bond market has been largely shut down, so where is the money going to come from if they run out of money?”

It is still true that Carvana is trading far away from its closing high of $370.10 in August 2021, even with this year’s gains.

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