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Carvana stock rises over 40% as firm ranks among the Fortune 500 top gainers

Carvana stock rises over 40% as firm ranks among the Fortune 500 top gainers
Dino Kurbegovic

Carvana (NYSE: CVNA) shares surged over 40% from August 4 to August 5, following what was an earnings miss according to Wall Street expectations. Namely, speculations of a potential short-squeeze, may have been the impetus for the stock’s surge in the most recent trading session.

Despite the fact that there has been talk about the possibility of a short squeeze involving Carvana, the company was one of the top gainers on the Fortune 500 list, placing third, with Walmart (NYSE: WMT) claiming first place overall.

The Arizona-based online auto retailer reported revenue of $3.88 billion, a 16.2% year-on-year increase, missing estimates by $110 million. Similarly, earnings per share (EPS) were -$2.35, missing by $0.47. Furthermore, gross profit per unit (GPU) fell by $1,752 from the prior year’s quarter to now $3,368, with the firm expecting roughly less than $4,000 GPU and positive earnings in the entire year of 2023. 

Ernie Garcia, founder, and CEO outlined that his company is making significant strides and improvements across all key metrics. 

“We made significant progress in Q2 across many fronts. We closed our acquisition of ADESA, outlined a new operating plan to quickly adapt to the changing market, and drove sequential improvement on all key metrics.”

He added:

“We also continue to deliver car buying experiences our customers love and are rapidly gaining market share as a result despite several industry and economic headwinds. We remain on the path to becoming the largest and most profitable auto retailer.”

CVNA chart and analysis

In the last month, CVNA has been trading in the $19.45 to $48.49 range, while the short-term trend is positive for the stock despite being near the lower end of its 52-week range. With the recent spike in the price, the support line has moved to $44.01, at the same time the resistance line is at $48.49. 

CVNA 20-50-200 SMA lines chart. Source. data. See more stocks here.

TipRanks analysts have a moderate buy’ rating consensus, seeing the average price in the next 12 months reaching $51.76, 10.17% higher than the current trading price of $46.98.

Wall Street analysts’ price targets for CVNA. Source: TipRanks  

If the short-squeeze occurs, more volatility can be expected in the price, with it shooting much higher than what was evidenced in the previous trading session. It will be interesting to track the data on the losses caused to short sellers if the trend continues. 

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