Trade Alert

Carvana is up 1000% this year! Is this a short squeeze in the making?

_{Posted by Club Member Charles IV 19.9.23}

Or a second chance to short the stock?

45% of the company’s float is short sold, and there are good reasons for that: the company’s fundamentals are poor!

Last quarter, retail units sold was down 35% year-over-year, and other underlying consumer metrics and leading indicators for sales are also flashing red. For example, web traffic data for Carvana is down 15% yoy, underperforming peers such as Carmax and AutoNation, that are showing improvements in their web traffic. Additionally, Carvana’s Consumer Happiness Score is low at 55%, compared to Carmax’s 68% and AutoNation’s 63%.

The macro picture isn’t great either. Last month, we saw that used car prices are falling again. The Loan rate for used vehicles is 7% -21%, which is much higher than the average new vehicle loan rate of 5% -14%, potentially hurting consumer demand for used cars.

The stock peaked at $370 in 2021, fell to around $4 per share in January, and now trades in the low $50s. Maybe some investors are sensing that the company is about to turnaround?

Carvana’s price chart looks like it is indicating a “Double Top”, so I’m staying out on this trade, but interested to know if anyone has a view on trading Carvana here?

#Carvana #Short Squeeze #Questions

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