What happened
Shares of Carvana (CVNA -1.18%) were climbing today on seemingly no company-specific news. Instead, investors may be coming back to the stock following a significant drop over the previous two trading days.
Some investors may be viewing the recent pullback as a buying opportunity, sending Carvana's stock up by as much as 6.7% today before settling on gains of 2.2% as of 3:33 p.m. ET.
So what
Carvana's stock plunged earlier this week after the Bureau of Labor Statistics released its latest inflation data. The report showed that the Consumer Price Index (CPI) rose 0.1% in August, which was worse than what some economists were expecting.
Image source: Getty Images.
Despite falling gas prices, costs for other goods rose during the month, resulting in inflation climbing 8.3% on an annual basis.
Carvana investors reacted strongly to that news for two straight days, sending the company's stock price down 14.2%.
But at least some investors appear to be looking at Carvana's recent share-price drop and are viewing it as a buying opportunity.
They may be latching onto comments made by Piper Sandler analyst Alexander Potter earlier in the week in which he said that Carvana's shares were undervalued right now. Potter upgraded the stock from a neutral rating to overweight (essentially, a buy rating).
The analyst said that while Carvana's stock price "could easily continue falling, but with so much potential upside, we think investors should consider owning at least some CVNA."
Now what
Investors have certainly changed their tune several times on Carvana's stock this week, which is a good indication of just how volatile the online car retailer's share price is right now.
While Carvana could end up being a good long-term investment, investors should prepare for more share-price shifts as the Federal Reserve gets ready for its latest meeting next week.
The Fed is expected to continue its aggressive interest rate hikes in an attempt to cool down inflation, but investors are worried that large rate hikes will end up slowing the economy down too much.
If that happens, consumers could pull back on their spending even more than they already have, resulting in lower sales for Carvana.
