Why Shares of Carvana Soared This Week
Shares of used car marketplace Carvana (NYSE: CVNA) soared by as much as 91.4% this week, according to data from S&P Global Market Intelligence. The company, which struggled throughout 2022 with shares falling by more than 95%, is likely soaring due to a short squeeze and a resurgence of meme stocks from WallStreetBets traders on Reddit this week. As of this writing, shares of Carvana are up 58.5% since last Friday's close.
Carvana's stock has a high short interest of over 50%, which represents the number of publicly traded shares that have been loaned out to short-sellers. Rising short interest can restrict the number of shares that are traded on a stock, increasing price volatility and the chance for a short squeeze, which leads to a bunch of short-sellers liquidating their positions and buying back the stock, thus driving up the share price.
Traders on Reddit's WallStreetBets forum have taken advantage of these dynamics in recent years, most notably with the meme stock craze. This week, meme stocks like Bed Bath and Beyond were up significantly even though the company indicated it may file for bankruptcy. Carvana, with its own balance sheet issues and beaten-down stock price, has risen to become the seventh most talked-about stock on the Reddit forum, up 42 slots in the last 30 days. A huge surge in buyer demand on an increasingly illiquid stock is likely why Carvana's shares are up so much, as there was nothing coming from the actual business to indicate investors have gotten more bullish on its fundamental prospects.
Source Fool.com
