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Carvana stock falls as used car prices fall

Carvana shares continued to fall Monday after a volatile downward trend began following the release of third-quarter results.

The shares fell 15% to close Monday at $7.39 per share. This continues a downward trend that started Friday when the company’s worst-ever performance in a single day, dropped 39%. After disappointing earnings, the plunge started due to lower-than-expected sales. Morgan Stanley analyst Adam Jonas pulled his $68 price target on Friday and stated that Carvana (CVNA), which is worth $1 per share, could be worth as low as $1. Citing the volatile financial markets and poor used-car market, Jonas replaced his previous target with a base range between $1 and $40 per share.

The market volatility caused trading to temporarily halt on Monday morning as a result of the continued rapid fall.

Carvana’s decline is indicative of a larger trend in the used vehicle sector. Car prices that are currently at an all-time high have fallen due to rising interest rates, talk about recession, and other factors. This could indicate that Carvana’s cars could be worth less than the company expected.

The problem for the used car industry began months ago when car prices rose so much that many customers were priced out. CarMax (KMX), which is the largest used car dealer in the country, has seen its shares drop 50% since the beginning of the year. The company blamed September’s poor performance on “vehicle affordability problems that stem from widespread inflationary pressures as well as rising interest rates and low consumer trust.”

Carvana’s growth was fueled by steadily rising car prices over the past two years. This is due to a shortage in parts, especially computer chips, which limited supply at a time of high consumer demand. As 40% of US households purchase a car every year, this increases inflationary pressures.

To reduce prices, the Federal Reserve has raised interest rates at a historic pace in recent months. This is part of its efforts to increase consumer demand and slow down the economy. Because many vehicle purchases are financed by consumers, they are particularly sensitive to an increase in interest rates.

According to the Manheim Used Vehicle Value Index (which tracks average car prices), used car prices have fallen 10.6% over the past year.

Carvana and other used car businesses are now dealing with the decline.

In a letter to shareholders last week, the company stated that “we were always going to need to traverse difficult times and cycles on our path to fulfilling our mission.” “We plan to make this a better period because we have been through it.

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