Carvana Revs Up Over 1,500% In A Year, Inflicts Heavy Losses On Short Sellers

Zinger Key Points
  • Carvana's stock soared 33% on Thursday after surpassing Q1 earnings expectations.
  • Annual gain exceeds 1,500%, intensifying losses for short sellers.

Carvana Co. CVNA experienced a dramatic surge on Thursday, with its stock leaping by 33% after reporting first-quarter earnings that surpassed expectations.

This jump pushed Carvana’s annual gain to over 1,500%, significantly deepening the financial squeeze on short sellers.

As revealed by Bloomberg, citing data from S3 Partners LLC, short sellers have now incurred losses totaling approximately $3.9 billion, with Thursday’s rise alone accounting for more than $860 million in paper losses.

On Thursday, Carvana shares closed 33.8% higher, recording their strongest session since July 2023.

Chart: A 1,500% Rally

Read Also: Carvana Analysts Increase Their Forecasts After Strong Sales

This resurgence marks a significant turnaround for Carvana. The Tempe, Arizona-based company had suffered considerable setbacks in the aftermath of the COVID-19 pandemic.

Despite the recovery over the past year, Carvana’s stock price still trails far behind its all-time high of $370 reached in August 2021 during a surge in used car demand.

Wall Street analysts remain cautious. Bloomberg data shows that Carvana holds only four buy ratings against 17 holds and three sells.

The consensus price target stands around $90. This suggests a potential downside of over 20% from its current trading level.

Optimism is growing among some analysts following the robust earnings report.

JPMorgan analyst Rajat Gupta upgraded the stock to overweight from neutral and raised their price target to $130 from $70, citing “continued rapid progress on all fronts.”

William Blair analysts have adjusted their 2024 earnings estimate for Carvana upwards by over 60% to nearly $1 billion.

They forecast a significant increase in profitability, expecting it to more than triple between 2023 and 2025. This represents a dramatic shift from the losses exceeding $1 billion recorded just two years prior.

William Blair’s Sharon Zackfia says this improvement in sales and margin expansion could position Carvana uniquely in the automotive retail sector.

Now Read: Why Carvana Shares Are Jumping Today

Image: Shutterstock

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