What's Going On With Carvana Stock Wednesday?

Carvana Co CVNA shares are trading lower by 1.4% to $128.96 Wednesday afternoon, though off the session low of $126.59. The stock fell following the release of the U.S. Consumer Price Index (CPI) inflation report for August, which revealed a persistent rise in core inflation, despite the headline inflation rate easing to its lowest level since February 2021.

The stock dropped early Wednesday as investors reacted to a surge in Treasury yields, driven by concerns over the potential for prolonged higher interest rates.

Inflation Data and Market Reaction

Inflation Data and Market Reaction: According to the report, headline CPI inflation fell to 2.5% in August, down from 2.9% in July, below the expected 2.6%. However, core inflation, which excludes food and energy prices, increased by 0.3% on a month-over-month basis, surpassing expectations of 0.2%.

The rise in core inflation points to continued pricing pressures in critical areas such as shelter, education and motor vehicle insurance, signaling that the Federal Reserve may hold off on interest rate cuts.

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Impact on Carvana's Business

Impact on Carvana’s Business: Carvana, an online used car retailer, is highly sensitive to shifts in both consumer purchasing power and borrowing costs. The unexpected rise in core inflation suggests that the cost of living for U.S. consumers is not easing as quickly as anticipated, which could hurt demand for big-ticket items like used cars.

Carvana's business model, which relies heavily on customers financing their vehicle purchases, may face additional pressure as rising interest rates increase the cost of auto loans, further dampening consumer demand.

Additionally, Carvana has significant debt on its balance sheet, making it particularly vulnerable to higher borrowing costs. With rising Treasury yields, the cost of servicing its debt could increase, potentially impacting the company’s profitability and cash flow. Investors appear to be pricing in these risks, leading to a decline in Carvana’s stock.

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How To Buy CVNA Stock

By now you're likely curious about how to participate in the market for Carvana – be it to purchase shares, or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ‘fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stock, like Berkshire Hathaway, or Amazon.com, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.

In the case of Carvana, which is trading at $129.25 as of publishing time, $100 would buy you 0.77 shares of stock.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ‘go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.

According to data from Benzinga Pro, CVNA has a 52-week high of $159.85 and a 52-week low of $25.09.

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