Carvana Co. joined the cast of postpandemic losers that includes Netflix Inc. and Peloton Interactive Inc. as investors tossed away the company’s ambitious growth targets and dumped its stock.

Shares of the online used-car retailer are down 20% in the past two days and nearly 80% since their peak last summer. Carvana’s earnings on Wednesday laid bare its failure to upend the used-car market despite borrowing billions of dollars to juice growth.

“We built for more than showed up,” Ernie Garcia III, the company’s chief executive, said during an earnings call Wednesday.

An expensive deal for a used-car auction company forced Carvana to announce the sale of $2 billion in common and preferred stock at the current low price. Analysts likened the move to tearing off a Band-Aid to address its rickety balance sheet. Carvana has burned cash for the 10 years it has been in business.

Chief Financial Officer Mark Jenkins said on the earnings call that raising that much capital will allow the company to keep expanding and “to stop having conversations about liquidity and what happens in a deep recession, and a prolonged recession, and all those sorts of things.”

Carvana’s sales declined in the past three months compared with last year’s fourth quarter and its net loss widened to $260 million from $36 million a year earlier.

The company blamed tough economic factors—rising interest rates, higher gas prices and inflation-weary consumers. Analysts criticized it for spending too much on marketing and labor without planning for the possibility of a slowdown, which Mr. Garcia acknowledged.

“The constant pressure of growth often dominates our priorities and slows our progress,” Mr. Garcia said on the earnings call.

That obsession with growth puts Carvana in the same bucket as Netflix and Peloton, which are now being valued at much slower growth rates. Having failed to disrupt its industry, Carvana now faces serious competition from entrenched players who are performing well now despite the macroeconomic headwinds.

With inventories on new cars crimped by factory production challenges, many buyers have been flocking to the used-car lot, creating a seller’s market for dealerships that has resulted in them charging more.

The average dealership profit on a used car was about $3,600 in the first quarter, according to J.D. Power. That is about 39% higher than the average profit from the first quarter of 2021, the research firm’s data shows.

AutoNation Inc. on Thursday reported net income of $362 million in the first quarter, up 51% over the same year-ago period. Revenue for its used-car business was up 47% for the quarter, pushing its overall revenue to $6.75 billion. Still, used-vehicle gross profit declined to $1,566 per vehicle, down 10% compared with the prior-year period.

Lithia Motors Inc., an aggressive acquirer of car dealerships, said profit more than doubled from a year earlier to $342.2 million. Average gross profit per unit for used vehicles rose 32%, to $3,037.

Tina Miller, Lithia’s chief financial officer, said her company sidestepped the affordability issue by selling vehicles that are up to 20 years old. That means it can direct customers to cheaper options if they can’t afford the model they want. “It’s something that you really have to invest in with your business,” Ms. Miller said.

Carvana is working on plans to improve the selection of more affordable vehicles for customers, Mr. Garcia said on the call Wednesday.

The company boxed itself in with its $2.2 billion acquisition of auction business ADESA U.S., which is expected to close next month.

Carvana in February told investors it had about $3.3 billion in committed debt financing from JPMorgan Chase & Co. and Citigroup Inc. Investors worried that the debt load would be too big and expected the interest rates on the borrowing to be far higher than the company had been paying. The company currently has just over $3 billion in long-term debt on its books.

Selling stock will help Carvana control its interest expenses, said John McClain, portfolio manager at Brandywine Global Investment Management, one of the company’s debt investors. “If you’re an unsecured bondholder, you’re breathing a sigh of relief,” he said.

—Nora Eckert contributed to this article.

Write to Kristin Broughton at Kristin.Broughton@wsj.com