by Carvana stock (CVNA) is still being run over.
Shares of the online car dealership fell 50% in the past two full trading sessions and fell another 18% in early trading Monday as Wall Street questioned the company’s business model after a mixed third quarter.
Carvana swung to an adjusted operating loss of $186 million, compared to a profit of $9 million a year ago. Execs told analysts during a conference call that they were preparing for a “difficult” year ahead, which hurt market sentiment around the stock.
Carvana’s ticker page was one of the most active on the Yahoo Finance platform on Monday.
Carvana’s two-day decline was set in motion by influential Morgan Stanley auto analyst Adam Jonas.
On Friday, Jonas released a note suggesting that Carvana shares could fall as low as $1. Jonas’s appeal is supported by declining demand for used cars and rising borrowing costs, both of which could hurt Carvana’s already less-than-solid financial statements.
The difficult financing environment alone “adds material risk to the outlook” for Carvana, Jonas said.
Other analysts on the street shared Jonas’s concerns.
“Carvana is taking action to overcome a challenging demand landscape that we believe is likely to linger until 2H23 (or longer),” Evercore ISI analyst Michael Montani wrote in a note to customers.
The analyst added that if Carvana fails to turn positive EBITDA in the second half of next year, it could lead to asset divestments, sale-leasebacks, delays in acquiring Adesa’s auction business and the need in additional capital, including by the founder. The family of Ernest Garcia III.
Montani calculated that Carvana has $4.4 billion in liquidity to come out a “jerky” 6-9 months.
Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.
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