Carvana, Vroom and Shift watch stock prices, fortunes fall

“You have to plan your infrastructure to support growth over the next year,” said Sharon Zackfia, who covers the three online used-vehicle sellers as an analyst at investment bank William Blair. “And as of January, I don’t think any of these companies expected the industry to get as tough as it did so quickly.”

Tougher conditions will require cutbacks in some areas as executives prioritize what they need to spend money on this year, he said.

To be sure, the economy is still growing rapidly, the job market is hot, and interest rates remain low by historical standards. Public dealer groups, which like many retailers have been emphasizing used-vehicle operations as they expanded their digital business, reported solid first-quarter earnings.

But online retailers are in worrying territory. Whether they can contain costs and curb losses in the coming months will be crucial, analysts said.

Analysts covering the companies said automotive news that this period probably does not represent the beginning of the end for the online used vehicle retail segment. But for these companies, which have been trying to achieve scale that can give them a competitive advantage, it may be the end of the beginning.

After flexing their skills and vision during the pandemic, they now need to take a more measured approach to growth to preserve cash and build consistent profitability.

“This is going to be a long process of slowing growth and better cost management,” said Rajat Gupta, a senior equity analyst at JP Morgan who covers auto retail including Carvana, Vroom and Shift.

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