Carvana Stock Could Be Worth As Little As $1 Per Share, Analyst Predicts Shares of the online used car retailer have plummeted more than 50% over the past two trading days.
By Madeline Garfinkle Edited by Jessica Thomas
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Carvana, the online marketplace for used cars, has seen a significant drop in stock prices, a downward trend that began on Friday and continued through Monday.
The fall comes after the company shared disappointing Q3 results on Thursday, with sales far below expectations. Morgan Stanley analyst Adam Jonas said in a note to investors Friday that Carvana stock could be worth as little as $1 per share due to the poor market for used cars and unpredictable financial systems that "add material risk to the outlook," Bloomberg reported.
Related: 1 Stock You'll Be Thankful You Didn't Buy in 2022
Carvana isn't alone in declining sales and earnings. CarMax, the leading used car dealer in the country, reported shares are down 50% since the beginning of 2022. The company cited "vehicle affordability challenges that stem from widespread inflationary pressures, as well as climbing interest rates and low consumer confidence," as reasons for the decline, per CNN.
But the used car market is facing another problem: the possibility the cars are faulty investments. As interest rates rise and chatter of a looming recession persists, the value of cars purchased by Carvana just a few months ago might now be lower than expected. According to the Manheim Used Vehicle Value Index, used car prices are down 10.6% as compared to a year ago.
"We were always going to have to traverse difficult periods and cycles on our way to fulfilling our mission," the company wrote in a memo to shareholders last week. "On the other side of this period, we plan to be a better company as a result of having gone through it."
Related: Carvana to Lay Off 12% of Its Workforce, Ignites 'Mass Hysteria'
