Many stock market investors are probably ecstatic that 2022 is in the rearview mirror after the S&P 500 and the Nasdaq Composite dropped 19% and 33%, respectively, last year. Aggressive interest rate hikes by the Federal Reserve and other major central banks to help cool inflation that was at 40-year highs deserve some blame as they quickly shrunk valuation multiples for many stocks. 

Growth tech stocks were some of the hardest hit. And among them, Carvana (CVNA -0.36%) was absolutely hammered. Shares of the online used car retailer cratered 98% in 2022. But this year has been a completely different story -- Carvana's stock is already up over 200% so far. There's no doubt that it has been extremely volatile in recent months, but that is a jaw-dropping return in just over one month's time. 

Does this renewed optimism make Carvana a screaming buy right now? Let's take a look. 

Cue the retail investors 

A hands-off investor who has no background information on the Carvana story might quickly assume that the business must be doing something positive that warrants the soaring stock price. But this would be a flawed perspective.

Carvana has been one of the top trending tickers on Reddit, the site that helped spur the meme-stock craze nearly two years ago. And this has caused a short squeeze, a situation in which short-sellers must quickly buy back the stock to cover their paper losses. This can lead to a surge in the share price in no time. 

But nothing has changed when it comes to the company's situation. During the third quarter of 2022, Carvana's number of retail units sold dipped 8% and revenue fell 3% year over year, sharp reversals from the monster growth shareholders were used to seeing in previous years. Higher interest rates are just terrible for Carvana's business model since they make used cars less affordable. 

Moreover, a cooling market, which suppresses used car prices, is a huge headwind because it means that Carvana's inventory balance of $2.6 billion (as of Sept. 30) is losing value with each passing day. And since the business usually turns around and sells the auto loans it approves for its customers to third-party institutional investors, more-restrictive capital markets hurt the company's prospects. 

It's evident that Carvana is an enterprise that relies heavily on rosy macroeconomic conditions. Even the slightest adverse change, whether it be with interest rates or inflation, can pump the brakes on the company's growth, as we saw last year. 

Making matters worse is its financial stress. As of Sept. 30, Carvana had just under $7 billion of debt versus cash of $300 million on the balance sheet. The $2.2 billion acquisition of ADESA, a wholesale used-car auction service, in May last year now looks like a poor allocation of capital because it further indebted the company.  

Carvana is the poster child of a business that took full advantage of artificially low interest rates over the past decade to pursue growth at any cost. And now that there might be a recession on the horizon, things could get even worse. 

This is a risky bet 

For what it's worth, Carvana does have some very positive characteristics, most notably its disruptive potential. The traditional brick-and-mortar used car sales process is a notoriously terrible experience for consumers, with limited inventory to choose from, information asymmetry, and the need to haggle with salespeople. Carvana aims to solve all of these problems, and that's exactly why the business has expanded so rapidly over the past decade. 

Investors who believe that the business will be able to make it over the current speed bump without a major restructuring or capital raise might want to consider the stock, which trades a price-to-sales multiple of 0.1, even after its surge so far this year. But it is a risky bet nonetheless, with too much uncertainty in the near term. Plus, the stock's extreme volatility can be hard to stomach even for the most mentally strong investors. 

I'll leave it to investors to decide if they want to take on this risk.