Carvana Stock Soars As Traders Bet On Fed Rate Cut

Carvana Co (CVNA) shares are trading higher on Wednesday as stocks across sectors gain on growing conviction that the Federal Reserve will cut interest rates at next week's policy meeting. Here’s what investors need to know.

• CVNA shares are climbing with conviction. See the full breakdown here.

What To Know: The move extends a rebound that began after Wedbush analyst Scott Devitt upgraded Carvana (CVNA) to Outperform and lifted his price target to $400, citing strength in recent results and a path to three million annual unit sales by 2033. Lower-rate expectations are now amplifying that bullish thesis.

Carvana's (CVNA) model is tightly tied to the cost of money. On the demand side, the company focuses on subprime and lower-prime borrowers whose monthly payments move with auto-loan APRs.

A Fed cut would lower those payments, pull more shoppers into the addressable market for used vehicles and support Wedbush's forecast for unit growth above 20% annually.

On the operating side, Carvana (CVNA) finances its inventory with variable-rate floorplan facilities and then securitizes the loans it originates. Cheaper short-term rates reduce the cost of holding vehicles, while falling Treasury yields typically narrow funding spreads and raise the premiums investors are willing to pay for Carvana's (CVNA) auto-loan bonds.

That combination boosts gross profit per unit and brings the company closer to its long-term adjusted EBITDA margin goal of 13.5%. With yields sliding and FedWatch tools putting the odds of a December cut near 90%, traders potentially see Carvana (CVNA) as one of the clearest winners from easier policy.

Benzinga Edge Rankings: Benzinga Edge stock rankings give you four critical scores to help you identify the strongest and weakest stocks to buy and sell, and Carvana (CVNA) currently sports an elite 99.14 Growth score with Momentum at 81.89.

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CVNA Price Action: Carvana (CVNA) shares were up 3.64% at $395.93 at the time of publication on Wednesday. The stock is trading is getting closer to its 52-week high of $413.33, according to Benzinga Pro data.

The stock is currently trading approximately 16.3% above its 50-day moving average, indicating a robust short-term bullish trend. Furthermore, it is trading around 31.4% above its 200-day moving average, suggesting that the longer-term trend remains firmly in positive territory.

This significant distance from both moving averages highlights the strength of the current rally and suggests that momentum may continue if buying interest persists.

Read Also: Small Caps Rally, Natural Gas Prices Jump To 3-Year Highs: What’s Moving Markets Wednesday?

How To Buy CVNA Stock

By now, you're likely curious about how to participate in the market for Carvana (CVNA) ? be it to purchase shares or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy “fractional shares,” which allows you to own portions of stock without buying an entire share.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform or a broker who will allow you to “go short” a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option or sell a call option at a strike price above where shares are currently trading ? either way, it allows you to profit from the share price decline.

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