Stifel analyst Scott Devitt downgraded Carvana (NYSE:) to Hold from Buy with a price target of $40.00 per share, down from $115.00 to reflect “deteriorating capital market conditions and worsening trends in the used vehicle industry.”

After agreeing to an expansion deal, the used car retailer announced yesterday it plans to trim its workforce by 12%.

Ernie Garcia III, Carvana’s CEO, stated that this move is necessary in order to keep expenses and staffing at the same level as sales.

“It has always been the right move to start building for growth well ahead of when we expect it to show up,” Garcia told employees via email. “This strategy worked for us every year until this one.”

Carvana has been forced to adjust its headcount to compensate for the impact of macroeconomic factors like inflation, higher interest rates and supply chain restrictions on the automotive retail market.

Carvana’s sales dropped for the first-ever time in the quarter. Carvana suffered a loss net of $260million.

“We are further reducing our estimates for Carvana’s retail and wholesale vehicle sales, and our revised model suggests that the company will need to raise incremental capital relative to its existing liquidity resources before reaching breakeven,” Devitt said in a note.

Morgan Stanley analyst Adam Jonas also recently downgraded CVNA stock. He expects that the company will take more restructuring steps.

“We believe CVNA is beginning a necessary phase of rebalancing their cost structure to a slower used car/macroeconomic outlook,” Jonas said in a memo to clients.

Carvana’s stock price has fallen 90% from its August 2013 record of $370.10

By Senad Karaahmetovic