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Business Times
02-08-2025
- Automotive
- Business Times
Carvana's 10,000% rally from low deals US$7 billion blow to shorts
[NEW YORK] Carvana's shares notched an all-time high this week, rising more than 10,000 per cent from a low in late 2022, and delivering a blow to investors betting against the online used-car dealer. The jump to record caps a roller-coaster ride for the stock that quickly became an investor darling after a public debut in 2017, but has also been plagued by criticisms ranging from claims that the company was overvalued and allegations of lax business practices. The latest gains came after the company's blockbuster second-quarter results on Wednesday (Jul 30) fuelled expectations that a turnaround is taking hold at the embattled company. As a result of the rally, short investors betting against Carvana have been dealt a US$7.42 billion blow in mark-to-market losses since the end of 2022, according to calculations from S3 Partners. About 10 per cent of the company's free float is currently held short, down from 55 per cent on Dec 27, 2022, when the stock had dropped to its lowest level. 'This rally from the lows has turned Carvana into one of the most spectacular recoveries in modern market history and a brutal reminder of how dangerous shorting stocks like this can be,' said Dave Mazza, CEO at Roundhill Financial. Carvana shares closed 5.7 per cent lower on Friday, retreating from Thursday's record but still ending the week more than 10 per cent higher. Carvana's online platform allows customers to buy a used car without getting up from their couch, a business model that attracted immense interest during the Covid-19 pandemic. The share price quickly skyrocketed, followed by a brutal 99 per cent wipeout during the wider tech sell-off that ensued. But now, as the appetite for riskier stocks and growth assets has come roaring back over the past month, Carvana is in the right spot to benefit. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'Before Gamestop, a move like this would have been impossible,' said Mark Hackett, chief strategist at Nationwide Funds Group, referring to the retail-trading-driven mania involving risky stocks that gripped the markets in 2021, and seems to be rearing its head again this year. 'But now it is common.' But it is not just the retail-trading fervour around growth stocks that's helping Carvana's shares, market watchers say. Carvana's online business model helps to differentiate it from other auto dealers, who largely operate brick-and-mortar stores, and that has given the relative upstart a higher valuation multiple. At the same time, the trade policy chaos unleashed by US President Donald Trump's tariff programme has been a boon to used-car sellers, who saw demand rise as consumers try to avoid the steep new levies. On Wednesday, Carvana reported second-quarter results that included record-setting revenue, propelling the stock to a breakout above 2021's prior record high. Nationwide's Hackett said that tariff-driven margin benefit was the main source of growth during the quarter. As Carvana soared from the 2022 low, its more traditional peers, such as CarMax, AutoNation and Lithia Motors, have seen no such surge. CarMax shares have fallen about 7 per cent over the same period as at Friday's close, while AutoNation climbed nearly 80 per cent and Lithia rose 44 per cent. After the latest results, some analysts see more strength ahead for Carvana. 'Investors haven't yet witnessed Carvana's true earnings power,' said Alexander Potter, analyst at Piper Sandler. BLOOMBERG
Yahoo
01-08-2025
- Automotive
- Yahoo
Carvana's 10,000% Rally From Low Deals $7 Billion Blow to Shorts
(Bloomberg) — Carvana Co.'s shares notched an all-time high this week — rising more than 10,000% from a low in late 2022 — and delivering a blow to investors betting against the online used-car dealer. The World's Data Center Capital Has Residents Surrounded An Abandoned Art-Deco Landmark in Buffalo Awaits Revival We Should All Be Biking Along the Beach Budapest's Most Historic Site Gets a Controversial Rebuild San Francisco in Talks With Vanderbilt for Downtown Campus The jump to record caps a roller-coaster ride for the stock that quickly became an investor darling after a public debut in 2017, but has also been plagued by criticisms ranging from claims that the company was overvalued and allegations of lax business practices. The latest gains came after the company's blockbuster second-quarter results on Wednesday fueled expectations that a turnaround is taking hold at the embattled company. As a result of the rally, short investors betting against Carvana have been dealt a $7.42 billion blow in mark-to-market losses since the end of 2022, according to calculations from S3 Partners. About 10% of the company's free float is currently held short, down from 55% on Dec. 27, 2022 when the stock had dropped to its lowest level. 'This rally from the lows has turned Carvana into one of the most spectacular recoveries in modern market history and a brutal reminder of how dangerous shorting stocks like this can be,' said Dave Mazza, CEO at Roundhill Financial. Carvana shares closed 5.7% lower on Friday, retreating from Thursday's record but still ending the week more than 10% higher. Carvana's online platform allows customers to buy a used car without getting up from their couch, a business model that attracted immense interest during the Covid-19 pandemic. The share price quickly skyrocketed, followed by a brutal 99% wipeout during the wider tech selloff that ensued. But now, as the appetite for riskier stocks and growth assets has come roaring back over the past month, Carvana is in the right spot to benefit. 'Before Gamestop, a move like this would have been impossible,' said Mark Hackett, chief strategist at Nationwide Funds Group, referring to the retail-trading-driven mania involving risky stocks that gripped the markets in 2021, and seems to be rearing its head again this year. 'But now it is common.' But it is not just the retail-trading fervor around growth stocks that's helping Carvana's shares, market watchers say. Carvana's online business model helps to differentiate it from other auto dealers, who largely operate brick-and-mortar stores, and that has given the relative upstart a higher valuation multiple. At the same time, the trade policy chaos unleashed by President Donald Trump's tariff program has been a boon to used-car sellers, who saw demand rise as consumers try to avoid the steep new levies. On Wednesday, Carvana reported second-quarter results that included record-setting revenue, propelling the stock to a breakout above 2021's prior record high. Nationwide's Hackett said that tariff-driven margin benefit was the main source of growth during the quarter. As Carvana soared from the 2022 low, its more traditional peers — such as CarMax Inc., AutoNation Inc. and Lithia Motors Inc. — have seen no such surge. CarMax shares have fallen about 7% over the same period as of Friday's close, while AutoNation climbed nearly 80% and Lithia rose 44%. After the latest results, some analysts see more strength ahead for Carvana. 'Investors haven't yet witnessed Carvana's true earnings power,' said Alexander Potter, analyst at Piper Sandler. (Story was updated to reflect Friday's stock moves.) How Podcast-Obsessed Tech Investors Made a New Media Industry Russia Builds a New Web Around Kremlin's Handpicked Super App Everyone Loves to Hate Wind Power. Scotland Found a Way to Make It Pay Off It's Not Just Tokyo and Kyoto: Tourists Descend on Rural Japan Cage-Free Eggs Are Booming in the US, Despite Cost and Trump's Efforts ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
28-07-2025
- Business
- Bloomberg
Meme Stock Roar Fades on Wall Street
Open Interest Bob Sloan, S3 Partners Founder, joins Open Interest to discuss meme and battle-ground stocks. (Source: Bloomberg)
Bloomberg
28-07-2025
- Business
- Bloomberg
Long Interest Is Driving Meme-Stock Action, S3's Sloan Says
S3 Partners founder Bob Sloan discusses what is driving the meme-stock market action on "Bloomberg Open Interest." (Source: Bloomberg)
Business Times
28-07-2025
- Business
- Business Times
Short sellers rack up US$25 billion loss on riskiest US stocks
IT HAS been a brutal month for traders shorting the riskiest US stocks, and as animal spirits imbue retail investors with boundless confidence, strategists expect the misery to continue for bears. As of Thursday (Jul 24), investors had lost US$2.5 billion in the month, betting against the 50 US-listed stocks with the highest short interest, according to data from S3 Partners. Doubting the hype in those firms, which include meme-stock darling Kohl's Corp, produced four times greater losses than the average short in the US market, as individual traders have pushed into speculative names. This week poses a big test for the risk-on mood, with the Aug 1 deadline for US trade deals looming, one of a slew of key events. However, strategists say the meme-stock frenzy likely has room to run. Data from Vanda Research Corp shows that net retail buying of companies such as Opendoor Technologies Inc and Krispy Kreme Inc has continued to trend higher. Trading frequency has risen as well, said Marco Iachini, senior vice-president of research at Vanda Research. 'I'm not seeing any signs' that the craze is fading, he said. Driving home how profitable a stretch it has been for investors betting on speculative corners of the market, a Goldman Sachs Group Inc basket of 50 stocks with the highest short interest in the Russell 3000 Index just posted a record ninth straight week of gains. It has climbed 33 per cent in that time, and clobbered both the Russell 3000 and the S&P 500 Index's returns of 10 per cent each. That Goldman basket of stocks is up 15 per cent this month. Justin Walters, co-founder at Bespoke Investment Group, wrote in a Thursday note: 'July has been a banner month for investors long on the most heavily shorted stocks (and brutal for those short them).' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Michael O'Rourke, chief market strategist at Jonestrading Institutional Services, said the run of outperformance by the most-shorted stocks in the market could signal that the current risk-on sentiment in the market is short-lived. 'I actually don't think this will be anywhere near as long as in 2021,' he said. The breadth of this meme-stock rally stands in sharp contrast to the case in 2021, when traders mainly piled into GameStop Corp and AMC Entertainment Holdings, he said. Other potential hurdles for equities bulls are on the calendar this week: A Federal Reserve monetary-policy decision, earnings results from a quartet of 'Magnificent Seven' companies and Friday's monthly jobs report. Plus, trading desks at firms, including Goldman, last week urged clients to buy cheap hedges against potential losses. However, amateur traders may drag institutional money into the speculative rally and keep it going, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. Once there are 'hedge fund holdings on both the long and short sides of these names, coupled with retail buying pressure, they tend to be more volatile and produce higher returns', he said. That produces more pain for short sellers, he added. Retail investors are 'squeezing hedge funds and then forcing this upward move', Vanda's Iachini said. BLOOMBERG
