Carvana stock soars – why?

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Carvana is revving higher on Wall Street as the supply of used cars strengthens and new car prices stay at record highs.

Shares for the online used car dealer have more than doubled year-to-date and are up by more than a third in the last five days.

Carvana Co

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

"Over the last few weeks, we have seen less used car supply in the market, while new car prices remain at all-time highs amid pent-up demand," he continued. "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."

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Used car sales down, 2023 inventory up, company issues remain 

Data compiled by the Kelley Blue Book show the average used car in America sold for $27,564 in October 2022, posting the lowest price since April. The price of a new car was $48,281.

Meanwhile, the nationwide supply of used cars is still 26% higher than one year ago.

The average new car sold for a near-record $48,281 last month, according to Kelley Blue Book.  (iStock)

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Amid tumbling used vehicle prices and re-emerging supply, Kobeissi said Carvana’s recent surge is relative, "As the stock is still down 94% over the last year."

"Many of the company’s issues go beyond near-term trends, and it’s not certain current car market conditions will persist." He added. "Overall, the company continues to trade near bankruptcy territory, consumer spending is falling, higher rates are coming, and the car market is unlikely to remain hot once supply chains begin normalizing."

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