Heavily shorted Carvana stock gains 56% after outlook update

Carvana (CVNA) shorts are in a hurry. Shares of the online car retailer rose 56% on Thursday – the biggest one-day gain on record – after the company updated its outlook.

The Tempe, Arizona-based company announced that it expects to achieve adjusted EBITDA in excess of $50 million in the second quarter of 2023. Earlier this year, Carvana reported that it would achieve positive adjusted earnings in second quarter, but had not given an exact amount.

Carvana also expects its total non-GAAP gross profit per unit to exceed $6,000, which is a new record for the company and an improvement of more than 63% compared to the same quarter of the year. last.

“The team’s continued focus on profitability has resulted in significant cost savings and efficiencies, and this work will continue as we continue to execute on our plan,” CEO Ernie Garcia said in a statement. the society.

Shares of the online car retailer have gained 425% year-to-date amid rallies reminiscent of the pandemic-era “meme craze”.

Carvana shares are heavily shorted. When it rises on the heels of a headline, investors who bet the stock would fall are forced to hedge their positions by buying the stock. This creates what is called a short compression.

The company, once a pandemic darling, laid off workers last year in a bid to cut costs and preserve cash. Carvana shares were crushed last year over fears of possible bankruptcy.

Douglas Arthur, managing director of Huber Research Partners, told Yahoo Finance earlier this year: “The stock market is largely closed, and the bond market is largely closed, so where will the money come from? ‘they lack money?

Carvana closed at $24.23 per share on Thursday.

Carvana shares jumped after the online car retailer's outlook for the second quarter.  REUTERS/Brian Snyder

Carvana shares jumped after the online car retailer’s outlook for the second quarter. REUTERS/Brian Snyder

Ines is a senior economics reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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