Carvana (CVNA) shorts are getting squeezed. The online car retailer's shares rallied 56% on Thursday— the biggest one day gain on record — after the company updated its outlook.
The Tempe, Arizona-based company announced it expects to achieve adjusted EBITDA above $50 million in the second quarter of 2023. Earlier this year, Carvana had signaled it would reach positive adjusted earnings in Q2 but hadn't given an exact amount.
Carvana also expects its non-GAAP total gross profit per unit to come in above $6,000, representing a new company record and a more than 63% improvement compared to the same quarter last year.
"The team’s persistent focus on driving profitability has resulted in significant savings and efficiencies, and this work will persist as we continue to execute our plan," said CEO Ernie Garcia in a company statement.
Carvana shares are heavily shorted. When it rises on the heels of a headline, investors who were betting that the stock will go down, are forced to cover their positions by buying the stock. This creates what's called a short squeeze.
The company, once a pandemic darling, laid off workers last year in an effort to cut costs and preserve cash. Carvana's stock was crushed last year over concerns of possible bankruptcy.
Douglas Arthur, managing director at Huber Research Partners, told Yahoo Finance earlier this year, "The equity market is largely shut off, and the bond market is largely shut off, so where is the money going to come from if they run out of money?"
Carvana closed at $24.23 per share on Thursday.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre