What happened
Shares of the online car marketplace Carvana (CVNA 1.07%) were tumbling today, despite market indexes making gains. Carvana's stock may have been falling as investors continue to process a price target cut from an analyst on Friday.
Additionally, investors are likely concerned that high inflation and a potentially slowing economy could negatively impact the company's quarterly results, which will be reported next week.
As a result, Carvana's stock was down by 6.5% as of 2:51 p.m. ET.
So what
On Friday, JPM Securities analyst Nicholas Jones kept an outperform rating on Carvana's stock but cut his price target to $45 down from $70.
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Based on his firm's analysis, Jones thinks Carvana will miss its third-quarter consensus estimates for retail unit sales and revenue by 7%, according to The Fly. He also thinks the auto industry could face continued headwinds into 2023.
Investors may be pairing those comments with the fact that inflation remains stubbornly high, despite the Federal Reserve's interest rate hikes.
Rising interest rates cause the borrowing costs for consumer auto loans to go up, which could continue to put pressure on Carvana's business. Additionally, if inflation remains high, the Fed could end up tipping the U.S. into a recession by raising rates too high and too quickly.
Now what
Carvana's share price drop today was in contrast to the S&P 500's 1% gain and the tech-heavy Nasdaq Composite's 0.4% climb by mid-afternoon.
Some investors were trying to extend the market's gains from last week, but Carvana shareholders mostly ignored any thoughts of optimism.
It could be that they're getting nervous about the company's upcoming third-quarter results, which will be released on Nov. 3. With the economy facing headwinds and some analysts less than optimistic about the company right now, Carvana investors appear to be losing some faith in the company.
