Carvana stock (CVNA) slid about 7% on Thursday on a downgrade from JPMorgan (JPM), pausing a series of short squeeze-fueled rallies that have sent shares of the online car retailer up 643% year to date.
“We are moving to Underweight from Neutral and reinstate a $10 PT on CVNA shares as we believe valuation has once again disconnected materially from fundamentals,” wrote analyst Rajat Gupta in a note to investors.
Positive headlines this year have sent shares of the Tempe, Arizona-based company, soaring in a move reminiscent of the pandemic-era "meme craze."
The stock has gained 273% in the last three months alone.
The stock's massive rallies have been buoyed by short sellers who have piled into the stock, betting it would move to the downside. When the stock goes up, some of those investors are forced to cover their positions, creating what’s called a short squeeze.
Short interest in Carvana currently sits at 54.85% of the float, an enormously high level, according to data analytics firm S3 Partners.
The company, once a pandemic darling, laid off workers last year in an effort to cut costs and preserve cash.
Shares reached a 52-week low of $3.55 on December 2022 amid speculation of a bankruptcy.
In June, the company announced it expects to achieve adjusted EBITDA above $50 million in the second quarter of 2023, sending the stock up 56% in one day.
Despite this year's gains, Carvana is still trading about 90% lower than its closing high of $370.10 in August 2021.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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