Carvana shares plunge to record low as used-car prices fall fast

Carvana Co. is set to wipe out more than half of its market value in just two trading sessions as the stock plunged to an all-time low on deepening gloom about used-car sales.

Shares of the auto retailer have sunk more than 53 percent in the two trading days since the company reported disappointing third-quarter results late on Thursday, bringing its once-lofty market capitalization down to about $1.4 billion from $2.6 billion before the earnings miss. That’s a far cry from the $60 billion valuation the firm commanded last year.

The shares fell 15.5 percent to $7.39 in afternoon trading on Monday.

Carvana — which allows its customers to buy a car from anywhere but also operates several high-visibility “vending machine” physical locations — saw its market value skyrocket last year when supply challenges in new-car production caused a surge in demand for used vehicles. That helped lure investors hungry for Covid-lockdown bets, especially given Carvana’s focus on at-home purchasing.

But the environment is changing as supply snarls ease, auto production gradually normalizes and the cost of used cars falls fast. Plus, the Federal Reserve’s fight against inflation has sent interest rates higher, raising the cost of financing vehicle purchases and weighing on consumer demand.