CVNA - Investors Beware: Short Squeezes Are Back
The stock market had another good day on Wednesday, with the Nasdaq Composite (NASDAQINDEX: ^IXIC) moving higher by more than 1% as of 1:30 p.m. ET. Market participants pointed generally to an inevitable recovery from 2022's poor performance, and they also expressed confidence that the latest numbers on inflation that the Bureau of Labor Statistics will release Thursday morning will continue the trend of easing price pressures.
When you look at the best performers on the day, however, you'll notice a lot of familiar names of companies that have been having considerable financial trouble. Among those high-flying stocks are Bed Bath & Beyond (NASDAQ: BBBY) and Carvana (NYSE: CVNA) , which have faced major headwinds that have posed existential threats to their ongoing businesses. Even though shareholders in these companies are seeing amazing results on Wednesday, the gains are coming largely from a phenomenon that's purely short term in nature and could reverse itself at any moment.
The thing that Bed Bath & Beyond and Carvana have in common is that they have had a lot of investors questioning whether they can stay in business. Bed Bath & Beyond announced just yesterday that its revenue had fallen sharply in the holiday quarter, raising new concerns about its ability to stay afloat amid rising pressure to get back on a growth trajectory. Indeed, with less than a month to go before needing to make a sizable interest payment on a portion of its debt, the home goods retailer has a lot of investors believing that it won't be able to keep operating without getting some form of protection or relief from its creditors.
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Investors, Beware: Short Squeezes Are Back