Carvana Inc.’s shares are losing almost all of their pandemic-fueled gains as investor enthusiasm for the company sours amid growing concerns about the impact of higher inflation and rising borrowing costs.
Since touching a stay-at-home fueled high in August, the online platform for buying used cars has fallen 83%. This week alone it lost 23%, following a disappointing first-quarter earnings release that showed a deepening cash burn, stemming from surges used-vehicle prices and capital spending.
Another blow is coming from the bond market.
The company struggled this week to raise $3.3 billion in the corporate debt market, having to revamp a junk-bond offering. Those new bonds fell on Thursday — their first day of secondary trading — even after Apollo Global Management Inc. bought roughly half of the debt.
Carvana’s “financing is done but costly and kicks the liquidity can down the road,” Bloomberg Intelligence’s credit analyst Joel Levington said. “What is left is a vulnerable balance sheet, a consumer that is cooling, and clearly a more difficult road back to the capital markets.”
The outlook for auto e-commerce industry will remain under pressure, with William Blair analyst Sharon Zackfia expecting other companies such as Vroom, Shift and CarLotz to largely disappoint on the number of units sold during the first quarter.
Carvana shares ended down 2.1% at $64.37 in New York on Thursday, the lowest close since close April 2020.
– By Esha Dey (Bloomberg)
