PPI data boosts US auto dealer stock Carvana up 10%
US car dealers' stocks rose on Tuesday, mainly driven by July PPI data, which boosted expectations of a Fed rate cut. Carvana's stock price surged by 9.75% to close at $146.49, nearing a 30-month high. Despite its short interest ratio of 13.3% being higher than its peers, its quarterly performance has attracted market attention. Analysts have maintained a "moderate buy" rating on Carvana with a target price of $163.83
According to the Zhitong Finance and Economics APP, US auto dealer stocks surged on Tuesday as July PPI data raised the possibility of a Fed rate cut, driving the market higher and causing a significant increase in rate-sensitive stocks. Carvana (CVNA.US) rose 9.75% on Tuesday to $146.49. The company's "industry-leading" quarterly performance continued to push its stock price close to a 30-month high.
In addition, CarMax (KMX.US) rose over 4% on Tuesday, while Lithia Motors (LAD.US) and AutoNation (AN.US) rose nearly 3%.
However, Carvana's short interest ratio is 13.3%, still higher than other similar companies, with CarMax at 12%, Lithia Motors and AutoNation at 10%, and CarGurus (CARG.US) at 9%.
One reason for the high short interest in Carvana may be continued doubts about the company's second-quarter performance, especially with gross profit per unit exceeding $7,000.
"This number is not only eye-opening in terms of total and absolute value, but also shocking in terms of relative value and components," said Seeking Alpha investor CashFlow Hunter. In comparison, CarMax's gross profit per unit is $2,300.
While there are doubts about Carvana's ability to earn such high profits per vehicle, shorts have undoubtedly felt the pressure over the past 6 months as Carvana's stock price has surged 172%, while the S&P 500 index has only risen 10% during the same period.
CashFlow Hunter admitted, "I wouldn't directly short Carvana, as that could be painful."
Overall, Wall Street analysts have given Carvana a "moderate buy" rating with an average target price of $163.83.
