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Richmond, Virginia-based CarMax, Inc. (KMX) operates as a retailer of used vehicles and related products. Valued at a market cap of $12 billion, the company provides a range of related services, including vehicle financing, extended warranties, accessories, and repair services.
Companies valued at $10 billion or more are typically classified as “large-cap stocks,” and CarMax fits the label perfectly, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the auto & truck dealerships industry. The company is known for its no-haggle pricing, extensive vehicle inspections, and customer-friendly return policies. It provides a seamless omnichannel experience, allowing customers to shop, finance, and sell cars both online and in-store. CarMax is also renowned for its strong vehicle sourcing and inventory management, ensuring a wide selection of quality cars through trade-ins, auctions, and direct purchases.
Despite its notable strength, this used vehicle retailer has dipped 14.6% from its 52-week high of $91.25, reached on Dec. 19, 2024. Moreover, it has declined 7% over the past three months, lagging behind the broader Dow Jones Industrial Average’s ($DOWI) 2.3% downtick over the same time frame.
Moreover, in the longer term, KMX has fallen 10.6% over the past 52 weeks, underperforming DOWI’s 5.5% uptick. However, on a six-month basis, shares of KMX are slightly up, outpacing DOWI’s marginal decline over the same time period.
To confirm its bearish trend, KMX has been trading below its 200-day moving average since early March, and has remained below its 50-day moving average since late February.
On Mar. 27, shares of CarMax, along with other auto parts stores and used car retailers, saw a rise due to speculation that the newly imposed 25% tariff on U.S. auto imports would lead consumers to keep and maintain their used cars rather than purchase new models. As a result, KMX's shares increased by 2.5% that day.
However, KMX has been underperforming over the past year due to the stronger-than-expected but struggling used car market and the slower-than-expected pace of interest rate reduction. Despite this, it delivered a solid Q3 performance on Dec. 19, 2024, which led to a 3.5% increase in its stock price. Its revenue grew 1.2% year-over-year to $6.2 billion with combined retail and wholesale used vehicle volume up by 5.8%. Moreover, its net earnings advanced by a notable 55.8% annually to $0.81 per share, driven by improved margins.
KMX has lagged behind its rival, AutoNation, Inc.’s (AN) 2.2% decline over the past 52 weeks but has outpaced AN’s 11.3% loss on a six-month basis.
Despite CarMax’s recent underperformance relative to the Dow, analysts remain moderately optimistic about its prospects. The stock has a consensus rating of “Moderate Buy” from the 17 analysts covering it, and the mean price target of $87.57 suggests a 12.4% premium to its current levels.
