Now Carvana is facing tests. The tailwinds that boosted growth—rising used-car prices, low interest rates and an early-mover advantage in online car sales—are ebbing. And the cash-burning company is years away from profitability.
Carvana shares are down by two-thirds from their peak last year and are close to losing all of their pandemic gains. The company’s bonds have fallen in price, mirroring declines in other speculative investments. Lower share prices and higher yields on its bonds would make it more expensive for Carvana to raise the cash it needs to fund its growth.
“The long-term sustainability of the business is still a question mark,” said David Binns, an analyst at S&P Global Ratings. The firm rates Carvana’s bonds as triple-C plus, meaning it needs favorable business conditions to repay its debt.
Investors expect the company’s Chief Executive Ernie Garcia III to address these questions when Carvana reports its…