Why the Carvana Weekly Options Trade was Originally
market continues to hold up and can correct and consolidate over time, one stock, which is experiencing
positive momentum after posting earnings and consolidating near its earnings
highs is Carvana Co
(NYSE: CVNA), which should benefit from this going
The stock is
up over 30% over the previous week and has reclaimed key Simple Moving Averages
(SMA), and is looking ready to breakout with bullish momentum and should
reported better-than-expected earnings of $3.60 per share in its latest financial
results, surprising the street as analysts expected the company to report a
loss. However, the company's revenue declined by 18% year-over-year and 7%
quarter-over-quarter, largely attributed to lower retail prices. In the third
quarter, Carvana sold 80,987 retail units, surpassing analyst predictions, but
experienced a 21% decrease compared to the previous year.
these challenges, the company's gross profit per unit (GPU), a key metric for
the company, showed significant growth with an overall GPU of $5,952 (up 70%
from the previous year), retail GPU at $2,692 (a 138% increase from the
previous year), and wholesale GPU at $618 (up 38% from the previous year).
Carvana's CEO, Ernie Garcia, expressed satisfaction with the strong GPU
The CVNA Weekly
Options Trade Explained.....
** OPTION TRADE: Buy CVNA DEC 08 2023 30.000 CALLS - price at last close was $2.46 - adjust accordingly.
Obviously the results will vary from trader to trader
depending on entry cost and exit price that was undertaken.
Entered the CVNA Weekly Options (CALL) Trade on Monday, November 13, 2023 for $1.95.
The CVNA weekly options contracts closed Monday, November 13, 2023 at $2.46; a potential profit of26%.
Still holding for further profit!
Don’t miss out on further trades – become a
was founded in 2012 by Ernest Garcia and two partners. Today Carvana is a
leading used-car dealer nationwide, the fastest growing in the US and
well-known for its chain of used car vending machines. The vending machines
allow pre-approved buyers to pick up their purchases at one of 32 locations
nationwide. Other buyers can have their vehicles delivered directly to their
door or to a location of their choice. Ernest Garcia III remains as CEO as of 2022.
He and his father, Ernest Garcia II, are among the company’s largest
operates an e-commerce platform that provides an end-to-end car buying
experience without the hassles of dealers or dealerships. The platform can
offer no-haggle pricing by leveraging its database of used vehicles and readily
available data for local car markets. Buyers can search for and find vehicles,
view them using the website's propriety technology, obtain financing and even
register their new car or get insurance.
company’s rise to fame was meteoric. The first vending machine was launched in
2013, leading to the brand's rapid expansion. The 1st fully-automated vending
machine was opened in 2015 and then later, in 2017, the company held its
initial public offering. The company IPOd on the New York Stock Exchange and
saw its share price quickly double, triple, and quadruple as used-car trends
and growing brand recognition boosted sales.
years included major acquisitions, including vehicle-data company Carlypso and
imaging firm Car360, which greatly enhanced the website and car-buying
experience. In 2020, with the onset of the COVID-19 pandemic, the company
initiated touchless delivery that allowed consumers to receive their vehicles
with minimal interaction. Consumers can also sell their used cars to the
company in exchange for cash or trade value. The trade-in business is a source
of products for the company and is a key to its success.
used cars are inspected a reconditioned by a team of industry professionals.
They have no reported fire, frame or flood damage and are certified by CARFAX
and AutoCheck data. Once purchased, consumers have 7 days to test drive and
return the vehicle with no charge. The total number of retail units sold in
F2021 topped 425,000 and resulted in $12.84 billion in revenue, or a growth of
129%. Cars that don’t make the cut are sold off through the wholesale unit,
which is a significant portion of the business. The company has a presence in
47 contiguous US states and is planning to deepen and expand its coverage.
began to mount in 2021 when the first of several states filed suit against the
company. Among the complaints were a failure to properly register vehicles and
deliver paperwork to consumers among other violations of state and local
car-buying regulations. The suits have resulted in a number of states banning
the company from operating, some indefinitely.
the CVNA Weekly Options
CVNA has successfully regained two crucial short-term moving averages
following its strong earnings report. And now, the stock is trading above the
5-day and 20-day SMA, suggesting positive short-term momentum. It's noteworthy
that CVNA has made multiple attempts to breach the $35 threshold but has
struggled to maintain this level. Nevertheless, the stock is still near this
crucial breakout point. Looking ahead, $35 assumes the role of a pivotal
inflection point, and a sustained breakthrough above this mark could trigger
substantial upward momentum.
Another factor to consider is the substantial short interest in CVNA. As
of October 15, the stock has 32.2 million shares sold short, accounting for
17.04% of the float. Although the probability of a short squeeze may not be
exceptionally high, it's essential to take note of this elevated short interest
figure, as it can amplify the impact of a potential stock breakout.
swung to earnings of $3.60 per share vs. expectations for a loss. Revenue came
in at $2.773 billion, down 18% year over year, and also down 7% quarter over
quarter, "primarily due to lower retail average selling prices,"
Carvana sold 80,987 retail units, above analyst expectations but down 21% year
gross profit per unit, or GPU, was $5,952, up 70% vs. the year-ago quarter but
down 9% from Q2 2023. Retail GPU was $2,692, up 138% vs. a year ago. Wholesale
GPU was $618, up 38% vs. a year ago.
GPU is a closely followed metric.
the second consecutive quarter, we delivered GPUs that far exceed our 2021 high
water marks," CEO Ernie Garcia said in an earnings release.
For the current fourth quarter, Carvana
- A sequential decline in retail
- GPU above $5,000 for the third
- Positive adjusted EBITDA for
the third consecutive quarter
For the full
year, analysts expect Carvana to lose $3.38 per share, a sharp improvement from
a loss of $15.74 in 2022, FactSet shows.
Despite the recent earnings surprise, analysts remain
cautious on Carvana stock, with a Reduce rating based on twenty-two analyst
ratings. Although the consensus analyst price target sees almost 12% upside for
the stock, only one out of the twenty-two analysts have CVNA as a Buy. Sixteen
have rated the stock as a Hold, and five rated it as a Sell.
The average twelve-month price prediction for Carvana is
$37.00 with a high price target of $60.00 and a low price target of $11.00.
collapse in 2022, Carvana stock has surged nearly 580% year to date off a low
base, amid improving business trends and a possible short squeeze.
However, in the short term, though,
the setup and short interest in CVNA might be the most relevant factors that
can cause the stock to trade higher, purely from a technical analysis point of
Carvana has a market cap of $5.83
billion, a PE ratio of -4.81 and a beta of 3.09. The stock’s 50 day moving
average is $38.54 and its 200-day moving average is $31.70.