CarLotz (NASDAQ:LOTZ) is shifting into gear for more gains on Thursday, after closing out 4% higher on Wednesday. And while the used-car seller offers a unique business model, there may be more to the story for LOTZ stock. With that in mind, what do you need to know today?
To start, investors should know that CarLotz recently started trading on its own. Previously, it was a blank-check play through Acamar Partners. After shareholders agreed to the special purpose acquisition merger, LOTZ stock made its independent debut.
Beyond that, CarLotz promises to disrupt car buying and selling. For sellers, it says its used-car marketplace is the in-between option to selling a car yourself and going through a dealership. There is less hassle, and you get more money than the trade-in value. For buyers, the company sees itself as a value play. In other words, you will find cars below their retail price, helping you find something you like within your budget.
So what has LOTZ stock on the move today? One way to look at the rally is simply that CarLotz is a company that makes sense right now. As some market analysts have said, it offers an asset-light approach to car buying and selling, making it stand out. Beyond that though, we know that used car sales are spiking thanks to Covid-19. With a loss of income and constraints on consumer spending, price tags on a used car may simply look friendlier. Plus, several consumers are still not comfortable taking public transit options. When you combine the need for wheels with tight budgets, used cars shine.
This narrative is certainly helpful to CarLotz. However, it looks like there is another reason for the major moves today.
LOTZ Stock and the Reddit Stocks Rally
Today, it looks like an influential group of retail investors is setting their sights on LOTZ stock. Yesterday, the resignation of GameStop (NYSE:GME) CFO Jim Bell caused shares to close higher by 100%. That was enough to fuel r/WallStreetBets. Talk of a second short squeeze and astronomical gains for popular stocks started once again. And while many fan favorites saw a spike, it looks like some investors are looking for new opportunities.
According to social media chatter, LOTZ could be that perfect opportunity. Posts are starting on r/WallStreetBets, although still gaining traction, outlining the investment case. One Redditor highlights the asset-light model, the benefits for buyers and sellers, and the data-driven marketplace platform. That Redditor also points out the short interest. According to Yahoo Finance, 2.46 million shares are in the float. Of those shares, 1.59 million are being sold short. With a roughly 65% short interest, CarLotz fits the Reddit stocks bill.
Keep this name on your radar. As we have seen in the past, a Reddit stocks rally can be quite powerful, and volatile. Proceed with caution but make sure to read up on the used-car sales potential here.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.