Year-to-date surge of over 1000%! Retail investors flock to Carvana, short sellers face another "slaughter" in US stocks.

This year, is Nvidia the best-performing stock in the US? Wrong! Online used car retailer Carvana has already surged 1077% this year!

After rising from $5 at the beginning of the year to $40 on Tuesday, Carvana skyrocketed another 40% overnight, pushing the stock price to $55.8.

What caused such an exaggerated increase?

One reason is that Carvana just released an earnings report that exceeded expectations: second-quarter sales decreased 23.6% YoY to $2.97 billion, surpassing the market's expected $2.59 billion; loss per share was $0.55, better than the market's expected loss per share of $1.15.

In addition, Carvana announced a debt restructuring agreement with creditors, eliminating over 83% of the unsecured Carvana bonds originally due in 2025 and 2027, and reducing future annual cash interest payments by over $430 million for the next two years. As a result, the company's total debt has been reduced by over $1.2 billion.

With outstanding performance and increased financial flexibility, these are all positive factors for Carvana. However, it should be noted that the company is still operating at a loss, and its long-term prospects remain uncertain. In short, based on fundamentals, Carvana has no reason to surge 1000% in six months.

So what is the real reason? It's simple: just like the "meme stock frenzy" in the era of the pandemic, the short sellers are being slaughtered!

You see, GameStop (GME) and Bed Bath & Beyond (3B) have already become a thing of the past, while Carvana, heavily shorted by many, is the hottest "retail investor group stock" this year!

According to data provider S3 Partners, 47% of Carvana's outstanding shares, which is equivalent to 40.4 million shares worth $1.6 billion, have been shorted—compared to less than 2% of tradable shares of companies in the S&P 500 index that have been shorted on average.

This happens to be the type of stock that retail investors love—when retail investors flock in, the short sellers have to cover their positions, further driving up the stock price.

S3 Partners stated that this year, short sellers have already covered 13.75 million shares worth $547 million. As of Tuesday's close, short sellers have incurred losses of approximately $1.54 billion in market value.

Ihor Dusaniwsky, Managing Partner at S3 Partners, further commented:

"With Wednesday's stock price increase, the short squeeze on Carvana will tighten further. It is expected that more short sellers will cover their positions today and in the coming days, as the shorts are looking for exit points to reduce their risk exposure in a highly unprofitable trade." "