Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Investors threw Carvana (CVNA -1.94%) stock into reverse on Friday, trading the auto retailer’s shares down by almost 2%. On a day when the S&P 500 index motored slightly higher, there was a solid underlying reason for Carvana’s decline — namely, the latest quarterly results published by a rival.
Said rival is fellow retailer CarMax, which on Thursday before market open unveiled its third-quarter results. Unfortunately for the company, its investors, and the broader auto retail space, these disappointed the market. CarMax recorded notable year-over-year declines in unit sales, revenue, and earnings.
That hardly bodes well for other companies that earn money by slinging the metal. CarMax attributed its slides to macroeconomic headwinds that have put the cost of vehicles out of reach of many consumers.
As an auto dealer, Carvana basically drives on the same road as its peer, so it was hardly a surprise that investors sold out of it in sympathy. We can say the same for other automotive stocks more generally, as a clutch of them also saw uncomfortable price declines on Friday.
Ultimately, though, with that sub-2% fall, Carvana’s shares experienced more of a tap on the brakes than a screeching halt and violent reversal.
Investors in this space have, after all, become accustomed to discouraging news about the car retail segment. Even though inflation has come down, it’s still having a limiting effect on consumer behavior, while uncertainty about the future of the economy continues to weigh on the minds of many potential car buyers. Given that situation, we shouldn’t expect a sudden lurch forward for Carvana or any of its peers in the near future.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CarMax. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.
Market data powered by Xignite.
