$CVNA A Pure Short Squeeze Play
Already up 311% YTD, Carvana Co. (NYSE: CVNA) could be on track to continue its impressive run thanks to its recently announced Q2 financial outlook which is better than expected. Following the release of the improved financial outlook CVNA stock soared more than 64%, however, the stock recently lost 21% due to analysts’ suspicions that the improved Q2 forecast is a one-time thing. Despite this, the recent sell-off could be an overreaction since CVNA is successfully implementing its turnaround plan which might see CVNA stock continue to climb ahead of its much anticipated Q2 earnings with its extremely high short interest.
CVNA Fundamentals
Improved Q2 Outlook
With the new Q2 2023 financial outlook, CVNA is looking to achieve its first step in its plan to tackle its long-term debt since it is expecting to achieve an adjusted EBITDA of more than $50 million. Furthermore, CVNA increased its total gross profit per unit (GPU) forecast by 20% which is a massive advancement in its second step.
The new guidance is showing that CVNA is on the right track and is improving its position quickly – especially with the company increasing its loans sold or securitized to nearly $2 billion compared to $1.3 billion sold or securitized as of May 4, 2023.
Following CVNA stock’s impressive run on the promising Q2 outlook, the stock saw itself fall more than 21% due to analysts suspecting the improved Q2 forecast is a one-time upside. Analysts believe that even if CVNA achieved positive adjusted EBITDA, it would come at the expense of revenue growth. With that said, CVNA’s first priority is tackling its long-term debt and it is willing to sacrifice growth to do that since the debt poses a more significant threat to CVNA than its growth prospects.
Will The Squeeze Continue?
In the meantime, CVNA remains highly shorted with a short interest of 64.1% and 76.8% of its float on loan. At the same time, utilization rate remains high at 100% which indicates that CVNA might skyrocket on its Q2 earnings if the company delivers on its projections as that would signal the success of the company’s efforts to turn around the business.
Technical Analysis
CVNA stock’s trend is bullish with the stock trading in an upwards channel. Looking at the indicators, the stock is trading above the 200 and 50 MAs which are bullish indications, yet it is trading below the 21 MA which is a bearish indication. Meanwhile, the RSI is neutral at 49 and the MACD is bearish. It is also worth noting that the stock has a gap near $15.7 that may be filled in the future.
As for the fundamentals, CVNA just witnessed a catalyst in its Q2 financial outlook update and has a major upcoming catalyst in its Q2 earnings. Since this earnings report is critical to see whether CVNA is moving in the right direction to tackle its mounting debt, the stock could soar on a positive earnings report.
CVNA Forecast
CVNA’s updated Q2 financial outlook provides some positive signs for its future since it is steadily implementing its plan to tackle its long-term debt. In this way, analysts’ fears regarding CVNA not achieving revenue growth appear to be out of place especially since CVNA was clear that it is going to prioritize profitability over revenue growth. Based on this, the recent sell-off could be an opportunity for investors to hop on the CVNA bandwagon in anticipation of a short squeeze on its Q2 earnings.
CVNA Fundamentals
Improved Q2 Outlook
With the new Q2 2023 financial outlook, CVNA is looking to achieve its first step in its plan to tackle its long-term debt since it is expecting to achieve an adjusted EBITDA of more than $50 million. Furthermore, CVNA increased its total gross profit per unit (GPU) forecast by 20% which is a massive advancement in its second step.
The new guidance is showing that CVNA is on the right track and is improving its position quickly – especially with the company increasing its loans sold or securitized to nearly $2 billion compared to $1.3 billion sold or securitized as of May 4, 2023.
Following CVNA stock’s impressive run on the promising Q2 outlook, the stock saw itself fall more than 21% due to analysts suspecting the improved Q2 forecast is a one-time upside. Analysts believe that even if CVNA achieved positive adjusted EBITDA, it would come at the expense of revenue growth. With that said, CVNA’s first priority is tackling its long-term debt and it is willing to sacrifice growth to do that since the debt poses a more significant threat to CVNA than its growth prospects.
Will The Squeeze Continue?
In the meantime, CVNA remains highly shorted with a short interest of 64.1% and 76.8% of its float on loan. At the same time, utilization rate remains high at 100% which indicates that CVNA might skyrocket on its Q2 earnings if the company delivers on its projections as that would signal the success of the company’s efforts to turn around the business.
Technical Analysis
CVNA stock’s trend is bullish with the stock trading in an upwards channel. Looking at the indicators, the stock is trading above the 200 and 50 MAs which are bullish indications, yet it is trading below the 21 MA which is a bearish indication. Meanwhile, the RSI is neutral at 49 and the MACD is bearish. It is also worth noting that the stock has a gap near $15.7 that may be filled in the future.
As for the fundamentals, CVNA just witnessed a catalyst in its Q2 financial outlook update and has a major upcoming catalyst in its Q2 earnings. Since this earnings report is critical to see whether CVNA is moving in the right direction to tackle its mounting debt, the stock could soar on a positive earnings report.
CVNA Forecast
CVNA’s updated Q2 financial outlook provides some positive signs for its future since it is steadily implementing its plan to tackle its long-term debt. In this way, analysts’ fears regarding CVNA not achieving revenue growth appear to be out of place especially since CVNA was clear that it is going to prioritize profitability over revenue growth. Based on this, the recent sell-off could be an opportunity for investors to hop on the CVNA bandwagon in anticipation of a short squeeze on its Q2 earnings.
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