Unpacking Carvana’s Blockbuster Earnings Report

Carvana stock is trading at its highest level in nearly two years after earnings

Carvana Co (NYSE:CVNA) stock is surging today, up 35% to trade at $117.69, after the online used-car retailer reported first-quarter earnings of 23 cents per share — much higher than the expected loss of 64 cents — on revenue of $3.1 billion. Better yet, the firm also issued a better-than-expected guidance for the current quarter.

Morgan Stanley and J.P. Morgan Securities both upgraded CVNA to “overweight,” and no less than eight analysts raised their price targets. There’s room for more upgrades and price target hikes, too, considering 18 of 20 covering brokerages rate the equity a “hold” or worse and the average 12-month target price of $86.31 is a 25.3% discount to current levels.

The shares are trading at their highest level since March 2022, and on track for their biggest single-day percentage gain in roughly two years. The stock now boasts a more than 1,500% year-over-year lead.

A short squeeze could be in play, considering short interest is down 2.9% in the last two reporting periods, yet the 28.57 million shares sold short make up 27% of the security’s available float. This represents nearly one week’s worth of pent-up buying power, at the stock’s average pace of trading.

Options volume is running at nine times the intraday average already today, with 53,000 calls and 46,000 puts exchanged at last check. The most popular contract is the weekly 5/3 130-strike call, while new positions are being bought to open at the 110-strike put from the same series.

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