Carvana shares soared 56% on Thursday and were set to go higher when US trading starts on Friday as short-sellers rushed to close positions after a much strong than expected second quarter.
The heavily in-debted online car dealer forecast underlying profits (EBITDA) would be above US$50mln in the three months to June, compared to market forecasts of a loss of US$6mln.
In May, a Carvana statement that it would post a profit this quarter was met with a wave of scepticism and betting it would fail to hit its target.
All that turned yesterday as trading in the shares hit record levels after the underlying profit guidance was released and shorters rushed to minimise their exposure as the shares soared.
More than 173mln shares changed hands sending the shares at one point to an eight-month high.
Around 47mln Carvana shares were sold short ahead of the company's forecast, Ihor Dusaniwsky, head of predictive analytics at markets data provider S3 Partners, told Reuters.
"The short squeeze definitely helped but it wasn't the primary driver of the price move, which was really due to long buying because there were so many shares traded" Dusaniwsky said, adding he estimated the shorters are down over US $1bn year-to-date.
Based in Tempe, Arizona-based Carvana said gross profit per unit (GPU) would be above $6,000, an improvement of 63% from the year-ago quarter.
Carvana has lost around 90% of its market value since hitting a peak in 2021.