Carvana Is 1 Of The 20-Most Shorted Stocks On The Market, But Share Prices Keep Going Up

Carvana Co CVNA, an online used car seller, is one of the 20-most shorted stocks according to S3 Partners, a firm that tracks short-selling data. But the stock has been resilient and is up more than 1,000% year-to-date.

Carvana is not the only so-called meme stock to see significant rallies in the past few months. Other heavily shorted stocks, like GameStop Corp GME, are also rallying and outpacing the S&P 500 throughout the last month or so. In fact, S3’s basket of the 20 most shorted stocks is up more than 17% since September, beating the overall market. 

More Short Squeezes? GameStop was the biggest story on Wall Street in 2021 when its stock skyrocketed from $17 a share to more than $500 a share in a few weeks. Since then, highly-shorted stocks, like AMC Entertainment AMC and Carvana, have garnered the interest of retail investors trying to identify the next rocket ship stock.

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Carvana saw material business growth during the pandemic, as high used-car prices acted as a tailwind for the company. But since then, growth slowed down and Carvana’s stock price plummeted, and was at one point down more than 98% from its highs in August 2021. Earlier this year, there were fears that the company could even be facing a potential bankruptcy, but the CEO has recently said that was never a worry.

But lately, the dynamics of business operations of Carvana have taken a backseat to the price action of its stock. The prospect of lower interest rates in 2024 has led investors to be more willing to take on risk and make bets on beaten-down names like Carvana. At the beginning of 2023, Carvana’s stock was trading around $5. Now, its share prices are more than 10 times higher, and trading at around $56 a share. 

Other names that crashed from their 2021 valuations have since made a strong comeback. Upstart Holdings Inc UPST, like Carvana, was at one point down more than 95% from its highs. But, in the last month, Upstart’s stock is up nearly 80%. 

It’s not clear how long the rally in these "meme stocks" or beaten-down names will last, but one thing is clear: the short sellers aren’t having a great time. 

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