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With a market cap of $13.5 billion, CarMax, Inc. (KMX) is the largest retailer of used vehicles in the U.S., offering a seamless shopping experience through both in-store and online platforms. The company operates under two segments: CarMax Sales Operations, which handles vehicle sales, merchandising, and services, and CarMax Auto Finance (CAF), which provides financing options for customers.
Shares of the used car dealership have slightly underperformed the broader market over the past 52 weeks. KMX has gained 21.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 22.3%. However, shares of KMX are up 8.2% on a YTD basis, outperforming SPX’s nearly 4% gain.
Focusing more closely, KMX has also lagged behind the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 27.3% return over the past 52 weeks.
Shares of CarMax rose 3.5% on Dec. 19 after the company posted a Q3 profit of $0.81 per share, exceeding analyst expectations. Revenue increased 1.2% to $6.2 billion, beating estimates, marking the first sales increase in over two years. The company also reported that 30% of its sales came from vehicles priced under $20,000, including popular models like the Toyota RAV4 and Ford Mustang, addressing affordability concerns. Analysts cited improving affordability and lower interest rates as key tailwinds benefiting CarMax's sales volume and future performance.
For the fiscal year ending in February 2025, analysts expect KMX’s EPS to grow 6.6% year-over-year to $3.22. The company's earnings surprise history is mixed. It beat the consensus estimates in one of the last four quarters while missing on three other occasions.
Among the 17 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on six “Strong Buy” ratings, three “Moderate Buys,” five “Holds,” one “Moderate Sell,” and two “Strong Sells.”
On Dec. 21, 2024, RBC Capital raised CarMax’s price target to $103 after its Q3 earnings beat. Retail comp used unit sales rose 4.3%, driven by a 3.9% drop in average selling prices to $26,153.
As of writing, CarMax is trading above the mean price target of $88.14. The Street-high price target of $110 implies a potential upside of 23.9% from the current price levels.
