Carvana Co. is staring down rising interest payments each of the next three months with vehicle sales and earnings moving in the wrong direction.
The $806 million loss the used-car retailer registered last quarter was more than triple the deficit analysts were expecting on a per-share basis. Coming off its lowest retail unit sales in two years, Carvana forecast another drop in the first three months of this year, as it shrinks inventory and slashes marketing spending.
After making an ill-timed acquisition just as sales and used-car prices took a turn, the once rapidly growing retailer is “firmly in retreat mode,” Kevin Tynan, a Bloomberg Intelligence auto analyst, said in a note. Carvana shares plunged 20.5 percent to close Friday at $8.01.
The quarterly loss reported after the close Thursday caps a disastrous year in which Carvana’s stock plummeted 98 percent, erasing almost almost $37 billion of market capitalization. While the shares have more than doubled this year, Bloomberg Intelligence credit analyst Joel Levington cautioned ahead of the earnings that the move mirrored what occurred at Hertz Global Holdings Inc. before the car-rental company filed for bankruptcy in 2020.
Carvana’s biggest problem is its debt, which stands at more than $8 billion with $2.4 billion in cash burn projected over the next two years, according to Levington.
“They need to restructure their balance sheet,” he said in a phone interview. “They probably need to shave off 85 percent of their debt, otherwise they will be a vulnerable company for years.”