Carvana Shares Plunge to Record Low as Used-Car Prices Fall Fast

(Bloomberg) – Carvana Co. wiped out about half of its market value in just two trading sessions as the stock plunged to an all-time low on growing sluggishness over used-car sales.

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Shares of the online retailer have fallen 49% in the two trading days since the company reported disappointing third-quarter results Thursday night, bringing its once-high market capitalization down to around $1.3 billion from 2 $.6 billion before profit loss. That’s a far cry from the $60 billion valuation the company commanded last year.

Carvana, which allows its customers to buy a car from anywhere, saw its market value soar last year when supply problems in the production of new cars caused a surge in demand for used vehicles. This has helped attract investors eager to bet on the Covid lockdown, especially given Carvana’s focus on home shopping.

But the environment is changing as supply dwindles, auto production gradually normalizes, and the cost of used cars drops rapidly. Additionally, the Federal Reserve’s fight against inflation has pushed up interest rates, increasing the cost of financing vehicle purchases and weighing on consumer demand.

The closely watched Manheim Used Vehicle Value Index, which tracks used vehicle prices, fell in October for a fifth consecutive month, down 10.6% from a year earlier. . This is the largest such decline in the index’s nearly 28-year history.

For Wall Street analysts, this change represents a major challenge for Carvana’s business. On Friday, Morgan Stanley analyst Adam Jonas withdrew his rating from the company, saying the stock may be worth as little as $1 as a deteriorating used-car market and volatility in interest rates interest and funding environment “add significant risk to the outlook”.

Analysts’ average price target on the company has fallen about 30% since Thursday’s close.

“Cars are extremely expensive and they are extremely interest rate sensitive,” Carvana CEO Ernie Garcia said on a conference call with analysts last week.

–With the help of Jeran Wittenstein.

(Updates with closing prices throughout.)

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