Why Carvana Sank as Much as 16.9% This Week
Shares of Carvana (NYSE: CVNA) dropped as much as 16.9% this week, according to data from S&P Global Market Intelligence. The online used car marketplace got an analyst downgrade and was negatively affected by an earnings report from Ally Financial. As of the market close on Thursday, Oct. 20, the stock is down 15.5% this week.
On Wednesday morning, consumer bank and automotive lender Ally Financial reported its third-quarter earnings. The company disappointed investors across the board, with earnings, revenue, and guidance coming in below expectations. What does this have to do with Carvana? Since Ally is the largest used car lender in the United States, its results can give a reading on the health of the used car market. The two companies even have a partnership in which Ally provides loans to buyers on Carvana's marketplace.
Ally's third-quarter auto originations were $12.3 billion, down $1 billion from the second quarter. This could indicate that Carvana is seeing worsening demand in its marketplace. Used car prices are also coming off their highs from the COVID-19 supply crunch. Lower car prices mean that Carvana might have to write down any of the car inventory it bought at higher prices.
Source Fool.com
