Why Carvana stock has crashed in the last 2 days of trading

Why Carvana stock has crashed in the last 2 days of trading

Carvana (CVNA) stock continues to be destroyed.

Shares of the online auto retailer have fallen 50% in the last two full trading sessions and were down another 18% early Monday as Wall Street questioned the company’s business model after a mixed third quarter.

Carvana posted an adjusted operating loss of $186 million compared with a profit of $9 million a year ago. Executives told analysts on a conference call that they were bracing for a “difficult” year ahead, which didn’t help market sentiment around the stock.

Carvana’s page was one of the most active on the Yahoo Finance platform on Monday.

The two-day slide in Carvana stock was started by Morgan Stanley’s top auto analyst Adam Jonas.

On Friday, Jonas published a note suggesting that Carvana shares could fall as low as $1. Jonas’ call is supported by a backdrop of weakening used car demand and rising finance costs, both of which could weigh on Carvana’s already less-than-sterling financial statements.

The tough funding environment alone “adds significant risk to the outlook” for Carvana, Jonas said.

NUMBER PICTURE BY PA PICTURE DESK A car was crushed by falling bricks at Seaton Sluice, Northumberland after strong winds from Storm Malik hit northern parts of the UK.  Photo date: Sunday, January 30, 2022. (Photo by Owen Humphreys/PA Images via Getty Images)

A car is crushed by falling bricks in Seaton Sluice, Northumberland, after strong winds from Storm Malik hit northern parts of the UK on Sunday, January 30, 2022. (Photo by Owen Humphreys/PA Images via Getty Images)

Other analysts on the Street echoed Jonas’ concerns.

“Carvana is taking action to overcome a challenging demand landscape that is likely to persist into 2H (or longer) in our view,” Evercore ISI analyst Michael Montani wrote in a note to clients.

The analyst added that if Carvana fails to turn EBITDA positive by the second half of next year, it could lead to asset disposals, leasebacks, delays in the acquisition of Adesa’s auction business and the need for additional capital, including from the founder. The family of Ernest Garcia III.

Montani estimated that Carvana has $4.4 billion in cash to see it through the “rocky” 6-9 months.

Brian Sozzi is editor-in-chief and Anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and up LinkedIn.

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