Perhaps no other stock has been as polarizing over the past year as Carvana (CVNA 8.79%). The online marketplace for used cars was a Wall Street darling for a long while, with rampant growth and its disruptive potential on every investor's mind.

Fast forward to today, and it's a wildly different story, with the company's financial struggles on full display. Some think the business is doomed, while others believe it's simply hitting a temporary rough patch. 

If you were one of those investors who put $1,000 into Carvana during its initial public offering (IPO) in April 2017, you would be sitting on a balance of $810 right now, good for a loss of 19% (as of April 6). Meanwhile, the S&P 500 and the Nasdaq Composite index are up 73% and 102%, respectively, during the same time. So, what happened with this business? Continue reading to find out about the Carvana story. 

A jaw-dropping rise 

Carvana's entire reason for existence is to upend the way that used cars are sold. The way it has long worked is that customers would go to a dealership, an experience that can be complicated and unpleasant. By leveraging data, technology, and the internet, Carvana's goal is to provide a totally online shopping experience, which can mean a more convenient and frictionless experience. 

This business model catapulted Carvana to remarkable success. In 2014, the earliest year that data is available, the company was in just three markets, sold 2,105 units, and generated revenue of $42 million.

In 2021, arguably the best year in Carvana's history, the business was in 311 markets across the country, sold 425,237 units, and generated $12.8 billion of revenue.

That is unbelievable growth. What's more, during that seven-year stretch, Carvana's net losses dropped to the point where it was expected the company would be profitable in 2022. 

Unsurprisingly, these gains resulted in tremendous stock returns for shareholders. From the IPO to Carvana's all-time high in August 2021, a period of just over four years, the stock was up 3,200%. And Carvana's market cap was more than $31 billion. It seemed as if this company could do nothing wrong. 

A monumental fall 

Readers likely know how this story ends. A perfect storm of problems struck the business toward the end of 2021 and throughout 2022.

Supply chain issues caused used car prices to rise. Rapidly rising interest rates made them even less affordable for consumers. Soaring inflation also meant consumers had less discretionary income. In this scenario, they'd be more likely to try to extend the life of their existing vehicles than buy another. 

The consequence of all these factors was a terrible year for Carvana.

In 2022, revenue was up 6%, but unit volumes declined 3%, a stark reversal from the previous several years. That's not too bad, but because Carvana had invested in its operational capacity with the expectation that demand would be much higher, its financials deteriorated. The net loss last year of $2.9 billion was far greater than the $287 million loss in 2021.  

Making matters worse was Carvana's acquisition of leading used car auction business Adesa in May last year for $2.2 billion, a deal that saddled the indebted company with more leverage. The timing couldn't have been worse, as Carvana was already dealing with an unfavorable market environment.

With interest payments at high levels and an extremely uncertain economic backdrop, some investors are questioning Carvana's survival. It's no wonder the stock is down 98% from its all-time high. 

Maybe one day Carvana will make for an insightful case study about how a disruptive, internet-based business fell faster than it rose. Right now, however, investors should only consider the stock at its discounted price if they believe in the company's long-term viability.