According to fund manager Trent Masters, businesses that rely on “free and unlimited capital” are now facing a harsh reality and may even go bankrupt. During the Covid years 2020-2021 — as central banks and governments pump money into global economies — some corporate valuations are “unsettled,” according to Masters, from Alphinity Investment Management. “But there are some businesses that have been fundamentally underpinned by that free and endless source of capital… Businesses that are capital intensive and never have to worry about the next dollar coming in. where they come from. But now they’re really worried,” he told CNBC. Carvana One company that falls into this category is the online car dealership Carvana, Masters told CNBC Pro Talks. He noted that Carvana’s business model of keeping physical cars comes with significant capital costs. This is manageable as auto prices rise and cheap credit is plentiful, Masters said, but that has become difficult for online car dealerships once these conditions have reversed. Masters, who manages the A$4 billion ($2.8 billion) management team, said: “It’s good that car prices go up and the capital to keep those cars is pretty cheap, but it can be drained. out in a hurry when it goes the other way.” billion) in assets. Shares of Carvana have plummeted more than 95% in the past year. Concerns about the company’s future grew after the company’s largest creditors signed an agreement binding them to act together in negotiations with the auto retailer in December. CVNA 1Y series Carvana’s stock has fallen more than 95% over the past year According to analyst consensus estimates compiled by FactSet, Carvana’s stock is expected to drop 6.6% over the next 12 months to 7.5 dollars per share. They were trading around $7.49 on Friday morning. Piper Sandler is a bank with a more bullish view on the stock, however, the bank’s analysts expect the stock to rise 460% to $45 a share. Carvana did not respond to a request for comment from CNBC Pro. Affirm Masters also said that some buy now pay post (BNPL) companies, such as consumer credit lender Affirm, are struggling in the current market conditions. “When it comes to BNPL, that’s really the tip of the spear [their customers] “The US federal government, for example, has issued more than $800 billion in payments to many American households in an effort to boost the economy,” Masters said. Masters also said the credit market has stopped buying low-rated bonds issued by Affirm over the past year due to rising interest rates, which further limits the credit provider’s ability to lend and grow its business. that I’m talking about where free and unlimited capital not only underpins value and growth, but it’s actually essential to the potential survival of those businesses,” Masters said. last year to $12 a share. version Mizuho Securities analysts led by Dan Dolev believe the stock could rebound 64% to $20 in the next 12 months. 21, that demand for Affirm’s bonds in the bond market “shows signs of improvement,” raising hopes for a turnaround, analysts said, in a note to clients on Dec. company shares. The company’s total debt-to-equity ratio also fell to 156% for the year ended June 2022 from 204% recorded in the quarter ended June 2020. This ratio, shown market as a percentage, above 100% indicates a company has more debt than equity. According to FactSet, the average analyst price target for the stock is $16 for Affirm, which represents a 31% increase from the current share price. AFRM 1-Year Line