Carvana (NYSE:CVNA) fell Monday after The Wall Street Journal quoted analysts as saying the online used car retailer could run out of cash within a year. Carvana announced Friday that it was laying off about 1,500 workers, as the economic environment continues to change and demand slows. For investors, “slowing demand” is likely the culprit behind the selloff in CVNA stock.
If Carvana was simply cutting jobs to boost margins while maintaining a similar top-line profile, CVNA stock would likely be rallying 7% today. However, CEO Ernie Garcia said the following about how current economic conditions are impacting the company:
“We failed to accurately predict how this would all play out and the impact it would have on our business.”
This is Carvana’s second major staff reduction in the last six months. However, it can’t be a surprise given the waning momentum in its business. That has been reflected in the stock price, too.
Both from the highs and year-to-date (YTD), CVNA stock is down more than 95%. Obviously, a bear market doesn’t help matters. But it’s really the lack of momentum in its business hurting Carvana.
On Nov. 4, CVNA stock sank more than 38% after the company significantly missed on earnings and revenue expectations. Worse, it generated a significant loss as well. Over a two-day span, shares fell almost 50%.
CVNA shares plummeted 51 cents, or 6.6%, to $7.55.
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