Carvana Soars Over 10,000% From Lows—Now It’s in the S&P 500

Core Insights - Carvana Co. has made a remarkable comeback, transitioning from bankruptcy concerns to being included in the S&P 500 index, with its stock price increasing over 10,000% from 2022 lows [3] - The market reacted positively, with Carvana's stock price reaching a new 52-week high of $456.97 on significant trading volume, indicating strong investor interest and institutional buying [4] Group 1: Market Reaction - Carvana's stock price surged by double digits following the announcement of its inclusion in the S&P 500, reflecting a strong market response [4] - The trading volume exceeded 14 million shares, nearly four times the daily average, highlighting the urgency and interest from investors [4] Group 2: Index Effect - The inclusion in the S&P 500 creates automatic demand for Carvana's shares due to the Index Effect, with an estimated $13 trillion in assets tied to the index [5] - Passive funds and ETFs are mandated to purchase Carvana stock, leading to a significant near-term demand shock [5][6] Group 3: Short Selling Pressure - As of mid-November, over 11 million shares of Carvana were held short, indicating potential pressure on short sellers due to the inelastic demand from index funds [6] - A short squeeze could occur, where short sellers are forced to buy back shares, further driving up the stock price [6] Group 4: Business Transformation - Carvana's addition to the S&P 500 is a result of a fundamental business transformation that has led to sustained profitability and impressive year-over-year revenue growth [7] - The company has shifted its focus from survival to market dominance, supported by a strong balance sheet and clear guidance for continued strong unit sales [7]