What happened
Shares of the online car seller Carvana (CVNA 2.85%) were having a volatile day Friday on seemingly no company-specific news. The stock dropped sharply early in the morning, causing trading to be temporarily halted.
But its share price then began climbing again, possibly on news of yesterday's better-than-expected inflation report. Shares resumed trading earlier in the morning and were up by 10.3% as of 2:16 p.m. ET.
So what
Carvana's stock might be continuing its gains from yesterday as investors hope that easing inflation -- which grew at a slower pace than expected in October -- will result in a better economic environment for car buyers.
The Consumer Price Index (CPI) rose by 0.4% in October from the prior month and 7.7% from a year ago. That was better than economists' estimate of an increase of 0.6% during the month and 7.9% for the year.
That sent Carvana's share price soaring 30% yesterday and could be encouraging investors to keep it rising today.
Now what
Carvana's stock has suffered over the past year, falling an astonishing 96%, amid rising inflation and worries of a recession. But the company's stock has also fallen beyond macroeconomic headwinds because of its poor financial performance.
For example, the company's third-quarter revenue (reported on Nov. 3) fell 3% to $3.39 billion, and its adjusted loss per share widened from $0.38 to $2.67.
Falling used-car prices have hurt the company, and reports that Carvana sold cars without properly registering them have made things worse. That's led to Carvana's volatile stock price and spurred analysts to cast doubt on its stock.
Even with the company's stock gaining 25% over the past week, investors should be very cautious. The company is spending lots of money right now and expenses are rising -- all at a time when macroeconomic headwinds are making matters worse.
