Carvana, an online used-car seller, reported a wider loss for the year 2022 compared to the previous year, leading to a drop of more than 21% in its stock value. The company's acquisition of Adesa, a used-car auction business, impacted its fourth-quarter and full-year results. Additionally, Carvana reported a 3% decrease in the number of cars sold to consumers in 2022.
JPMorgan analyst Rajat Gupta gave a bleak outlook for Carvana, stating that the company's high debt level suggests that there is no equity value left in the stock. Gupta estimates that Carvana's "cash liquidity" will last through the end of 2023, and only until 2024 if the company taps into about half of its real estate capacity.
Despite the challenges in the used-car market, the main issue for Carvana remains its huge debt load, estimated to be around $8.1 billion. The company's management has indicated that they are willing to add more debt if necessary for near to medium-term liquidity.
Piper Sandler analyst Alexander Potter noted that Carvana showed hints of progress in reducing operating expenses, but the fourth quarter did not offer enough evidence to disprove the bankruptcy thesis. The used-car market is expected to remain tough, with consumers remaining cautious amid concerns of a recession, high interest rates, and sticky inflation.
