CARS enters the week after earnings with an unusual split: the stock is up 5.5% on the week but still down 5.3% on Friday alone, and short interest has nearly doubled over the past month.
The short positioning story is the most striking feature of the current setup. SI climbed 26% over the past month to reach 11.7% of free float — roughly 7.0 million shares — after a sharp jump from around 5.5 million shares in early April. That spike came in two distinct waves: a first leg higher through mid-April, then a partial unwind before stabilising just above 7 million shares. The borrow market remains relaxed around this level. Availability is ample at 309% of short interest, meaning shares remain easy to source. Cost to borrow is just 0.51%, barely changed over the month. This is a stock where shorts have rebuilt aggressively but face no meaningful squeeze pressure.
Options sentiment has eased meaningfully from the extremes seen in March and early April, when the put/call ratio was running above 8. It has now dropped to 1.82 — below its 20-day average of 2.17 and about 0.8 standard deviations below that mean. That's a notable shift. Traders are still holding more puts than calls, but the defensive intensity has faded sharply since the April lows. Combined with the ORTEX short score sitting at 63.6 — firmly elevated but not spiking — the overall picture is one of persistent bearish positioning that is no longer accelerating.
The Street reacted quickly to Q1 results this week. JP Morgan raised its target to $11 from $10 while keeping a Neutral rating. UBS lifted to $12 from $11, also staying Neutral. The one rating change that cuts against the grain: B. Riley Securities downgraded to Neutral from Buy on Friday, holding its $13 target. BTIG, meanwhile, raised to $14 and held its Buy. The net result is a mean analyst target of $13.00 — a modest 11% above the current $11.68 close. The bull case rests on AccuTrade momentum, dealer wholesale growth, and a buyback programme targeting roughly $90 million. Bears point to flat revenue guidance, declining dealership channel profitability, and rising competition squeezing ARPD. Valuation is undemanding: EV/EBITDA running at 5.2x, PE at 4.7x — both drifting higher over the past 30 days as the stock recovered. EPS momentum factor scores are in the top decile over both 30- and 90-day windows, and forward EPS growth ranks in the 91st percentile, which is the one data point that clearly supports the bullish thesis.
Institutional ownership offers an interesting backdrop. FMR (Fidelity) holds nearly 15% of shares. Pale Fire Capital, an activist-leaning Czech fund, built a 6% position in one move as of the last reported date — a stake worth watching in the context of the "strategic alternatives" language flagged in the bear case. JP Morgan Asset Management added nearly 600,000 shares in the most recent quarter, while American Century added 425,000. Insiders are less encouraging: in early March, the CEO sold approximately 1.19 million worth of shares at $8.54, with the CFO and CLO following with smaller sales at the same price. The only buy on record was a director picking up under $16,000 worth of stock in mid-March. Net insider activity over the 90 days reads positive in share terms due to the award component, but the cash transactions are net sellers.
The next confirmed catalyst is the Q2 earnings call on June 3. With the short base rebuilt, borrow still cheap, and the Street split between a cautious majority and a Buy minority, the setup into that print is one of genuine tension rather than clear directional pressure.
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