Carvana (CVNA) stock is up 212% YTD and could soar even higher once a massive short squeeze is triggered.
Massive 59% Short Interest
CVNA has a 59% short interest according to Marketwatch and is one of the most shorted stocks on the NASDAQ.
However, Carvana stock has crashed over the last years due to the fact that short sellers drove the stock price down from as high as $152 in early 2022.
Short sellers must cover their position on borrow shares but they have been pretty greedy lately. If CVNA stock gets bought up then it could soar past previous $20 resistance levels.
CVNA shares have been rocky but the short term trend is moving in a positive direction. The company does $16 billion a year in revenue and currently trades at a Price to Sales ratio of 0.17.
Carvana Does Have Some Fundamental Issues
Now Carvana isn’t perfect and the company has struggled with a massive debt of $6 billion with only $522 million in cash.
Demand for used cars has sunk after a massive surge in demand during the pandemic. Also, rising interest rates have made it harder for consumers to purchase used cars. That’s caused the price of used cars to fall so far in 2023.
Take Profits Quickly on a Short Squeeze to Lock in Gains
If CVNA stock squeezes hard then it could only last 1 day or two until the bottom falls out. It’s important to take gains quickly on short squeezes because fundamentals drive stock prices in the long run.
I’ll be loading up on some 3/3 CVNA calls at various strike prices to play the upward momentum.
I don’t think Carvana is the best long term investment but I do believe in the potential from some stock & call options profits from a short squeeze.