Vending

Analysts wary about Carvana’s future as share price tumbles

Image provided by Carvana.

December 2, 2022

Carvana, an e-commerce platform for buying and selling used cars online that offers a car vending machine, faces an uncertain future as its share price has suffered and Wall Street analysts warn of a worsening future, according to an Automotive News report.

The company's shares have fallen 97% this year, and at least three analysts in the past week downgraded the stock, pointing to a combination of the company's high debt and weakening economic conditions.

Colin Sebastian, a Robert W. Baird analyst, wrote Tuesday his company lowered its share price target from $30 to $7, reflecting a greater likelihood of insolvency by 2024 barring the company's access to "significant" liquidity or a faster reduction in operating costs.

The company suffered a dip in sales and earnings for Q3, 2022, driving share prices Nov. 7 to $8.76 against a range of $8.37-$304.33.

These results significantly missed Wall Street expectations, with the company citing a weakening economy and declining demand for pre-owned vehicles.

Demand for pre-owned cars surged during the pandemic when supply chain issues undermined auto manufacturing, boosting used-car prices.

As supply chains improved, used car prices have fallen along with softening demand.

In addition, rising interest rates and higher inflation have discouraged consumers from making large purchases.

While analysts are wary of Carvana's future, Emmett White, a writer at Autoweek, believes online car buying has a future.