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Carvana & Lucid shares rise: Top tickers

Carvana shares rise after the company reported an updated outlook for the year. Lucid shares also rose after Reuters reported the company plans to join the EV market in China. Yahoo Finance Live breaks it all down.

Video transcript

AKIKO FUJITA: Let's take a look at shares of Lucid, closing the day lower today, down nearly 2% after the US luxury electric vehicle maker's head of China operations said the company was preparing to enter the world's largest car market. According to a "Reuters" report, Lucid will sell imported cars in China, may even consider opening a production plant there.

The natural question, I think, that comes to mind is, OK, how big of a threat is this to Tesla? We should point out Lucid has a very, very high price tag. This is sort of the top tier of the EV market.

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But when you think about how many cars were sold last year alone with Lucid, we're talking 4,300 vehicles in 2022. So we're still talking about a very small footprint. But it is interesting to see how they're trying to compete in the Chinese market, at least according to this report, and potentially produce cars there too.

SEANA SMITH: Yeah, well, can certainly be a huge growth opportunity here for Lucid, which has been struggling to really capitalize on some of their momentum here. When you take into account the fact that China is the largest market out there for cars, obviously, entrants into this space would be good news here for investors. You've got to question, though, demand right now.

Recovery in China has been slower than we had initially expected it to be. The numbers that Lucid is going for is still low, especially when you compare it to so many of the other EV makers, Tesla there, but also the Chinese EV makers as well. They're planning to produce more than just around 10,000 cars this year.

So they've got a long runway just in terms of when they make a larger footprint, larger impression within the EV space. But unlocking that potential in China would be very, very welcome news, and huge opportunity here for Lucid.

AKIKO FUJITA: I mean, premium, premium price tag.

SEANA SMITH: Very, very top of the line. [INAUDIBLE]

AKIKO FUJITA: All right, Carvana is getting a big boost today, closing the day well in the green after the company updated its financial outlook-- now expecting total gross profit per unit above $6,000 in Q2 and adjusted EBITDA above $50 million. Let's bring in Yahoo Finance's Ines Ferre for more. Quite the stock today, Ines.

INES FERRE: Yeah, that's right. Well, Akiko, a record gain today for Carvana in a one day gain, up 56% today after the company updated its outlook. Now, Carvana had said before that it would reach positive adjusted earnings in Q2 in 2023. But the outlook that was given today put in a figure on that-- that would be above $50 million, as you just mentioned.

And what this is showing, really, is that the company has been on a cost cutting plan, strategy. It laid off workers last year. Last year, the stock had gotten completely decimated over concerns of a bankruptcy-- possible bankruptcy, over concerns of tightening credit. Now, that's the headline, right?

But what happened was with the stock, as you see a headline like this, the stock goes up, and the short sellers get squeezed. So you saw a short squeeze on this stock, because it is-- Carvana continues to be a heavily shorted stock-- more than-- around 60% of the float. So, , look the stock had entered the year at around $4 a share. It is up 425% year to date.

We have seen these short squeezes before with this stock. When there's a positive headline, the short sellers that are betting that the stock will go down-- when the stock goes up, they're forced to cover their positions, buy back those shares, and, therefore, that exacerbates the price to the upside. So that's certainly part of what we saw today with the stock.

AKIKO FUJITA: OK. Ines Ferre with the excitement, at least for today, around Carvana. Thanks so much for that.