Carvana Stock Puts The Pedal To The Floor: What's Going On?

Heavily shorted Carvana Co CVNA shares are trading significantly higher Monday. Here's a look at what could be driving the action.

What To Know: Carvana shares were crushed last year amid bankruptcy concerns. The stock fell alongside used vehicle prices for a majority of 2022. The steep declines in the used car market marked the biggest drawdown since 2008, according to the Manheim Used Vehicle Index.

Carvana has been heavily shorted along the way, which could be driving some of the action in Monday's session. Benzinga Pro and Fintel data have short interest currently pinned in the 65% to 85% range. 

The stock is also trending across various social platforms. It appears retail traders are gravitating toward the stock as a potential short-squeeze candidate. The stock was among the top trending tickers on Stocktwits earlier in the day and it's among the top three most mentioned stocks on Reddit's r/wallstreetbets over the last 24 hours.

What Else: According to a Fox Business report, Carvana shares are stepping on the gas amid optimism that used car prices may have hit the lows.

In an interview with FOX Business, "The Kobeissi Letter" founder Adam Kobeissi reportedly said "Narrative around the stock has quickly shifted from worries about bankruptcy to hopes that the used car market has bottomed out."

"Given the record price of new cars, used cars remain an incredibly hot market as consumers are looking to cut spending in the wake of inflation," Kobeissi told Fox Business.

From Last Week: Investment Strategist Says Last Year's 'Trash' Is Not This Year's 'Treasure': Why High-Growth Tech Stocks Are 'Dead Money'

Carvana is set to report its fourth-quarter financial results on Feb. 23. In the comparable quarter last year, Carvana reported a net loss of $1.02 per share on quarterly revenue of $3.753 billion, according to Benzinga Pro.

CVNA Price Action: Despite surging more than 100% since the start of 2023, Carvana shares are still down more than 93% over a one-year period.

The stock was up 31.9% at $10.25 at time of publication.

Photo: Tony Webster from Flickr.