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Carvana stock short sellers lose $3.9 billion as CVNA surges

Carvana stock short sellers lose $3.9 billion as CVNA surges
Ana Zirojevic

With the recent impressive surge in the price of shares of online used-car dealer Carvana (NYSE: CVNA) after the release of a better-than-expect Q1 earnings report, their short sellers have accumulated face-melting losses, with figures nearing $4 billion in one year.

Indeed, Carvana shares surged over 30% in pre-market trading on May 2, catapulting CVNA stock from $87 to $116 after the release of the company’s positive Q1 earnings report, which showed it had managed to avoid losses and turned a profit following restructuring and strategic adjustments.

Carvana stock short-seller losses

As it happens, the skyrocketing CVNA share prices have pushed the stock’s annual advance to surpass 1,500%, extending short-seller losses to a whopping $3.9 billion, with just the recent daily price increase costing them over $860 million in paper losses, according to a Bloomberg report on May 2.

Carvana shares price chart. Source: Bloomberg
Carvana shares price chart. Source: Bloomberg

Meanwhile, X user tracking insider trades, Quiver Quantitative, referred to the recent price increase as “ridiculous,” pointing out that, in December 2022, a Carvana bankruptcy looked imminent but that insiders didn’t think so, having bought over $663 million in CVNA shares during the preceding year.

X post from December 2022. Source: Quiver Quantitative
X post from December 2022. Source: Quiver Quantitative

Carvana father-son duo profit

At the same time, the 3,000% surge from historic lows has brought Ernie Garcia II and Ernie Garcia III, the father-son duo behind the company, over $11 billion in combined net worth since December 2022 – the month in which CVNA shares dipped below $4 as Carvana faced significant troubles.

Specifically, the one-day bullish rally for the price of CVNA shares has pushed the older Garcia’s fortune to $10.9 billion from a 2022 low of $3.1 billion, while his son’s net worth climbed to $3.8 billion, according to the data shared by analysts from Bloomberg Billionaires Index. 

Commenting on the recent developments, the 42-year-old Ernie Garcia III, Carvana’s CEO who co-founded the company in 2012 with his 67-year-old father and who derives his wealth mostly from his stake in Carvana, told Bloomberg TV:

“2022 and 2023 were a tough run for us. (…) When we went through that period, the team came together, we responded incredibly well and I think this quarter is undoubtedly the best quarter we’ve had in our history.”

Carvana stock price analysis

Currently, the CVNA stock is changing hands at the price of $117.05, which suggests a 33.77% gain in the last 24 hours, an advance of 34.43% across the previous seven days, adding up to the 40.89% increase on its monthly chart, as per the most recent data obtained on May 3.

Carvana stock price 1-week chart. Source: Finbold
Carvana stock price 1-week chart. Source: Finbold

That said, Wall Street experts are still largely undecided on Carvana, with 12 of them rating CVNA stock as a ‘hold,’ only two recommending a ‘buy,’ and one standing by the ‘sell’ recommendation, collectively placing the average price target at $69.27, as per TipRanks data.

Wall Street analysts’ CVNA stock ratings. Source: TipRanks
Wall Street analysts’ CVNA stock ratings. Source: TipRanks

Not long ago, Finbold reported on Carvana stock as “coming back from the dead” with an 800% surge over the previous 12 months despite teetering on the edge of bankruptcy with a $6.3 billion in debt, trades at a 110x price-to-earnings (P/E) ratio, and default rates on car loans mimicking the 2008 crisis.

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