What happened
Shares of Carvana (CVNA +1.50%) continue to roll into the ditch Thursday morning, nearly two weeks after reporting pretty ugly financial results that showed revenues falling and profits plunging from the year-ago period.
The stock is down 5% at 11:06 a.m. ET on no company-specific information, but there are signals indicating the economy may be heading for an official recession in the very near future. Even the broad market index, the S&P 500, is down over 1% so far today.
Image source: Getty Images.
So what
Even if the Federal Reserve won't raise interest rates going forward, it may be a case of too little, too late. Numerous economic indicators, from inflation to producer prices and capital equipment orders, are all looking negative.
And interest rates are now far higher than they were at the start of the year as the Fed initiated its quantitative tightening program, meaning the cost of financing a new or used car purchase will be more expensive than it was. It will be a disincentive for consumers to buy one now, as food and fuel costs are consuming an inordinate percentage of available discretionary income.
NYSE: CVNA
Key Data Points
Now what
Carvana was going to have a tough go of it anyway. Its inventory levels have fallen sharply, and they're expected to continue declining in the fourth quarter. Where retailers might want to run a leaner ship, car dealers need a broad selection of vehicles for consumers to choose from, or it becomes more difficult for them to find a suitable match.
Carvana's financial situation is also becoming more precarious, as it has a heavy debt load to service ($6.6 billion at the end of the last quarter) and little available cash.
