CarMax Could Scale to Fresh Record High on Upbeat Q2 Earnings; Target Price $165

The United States’ largest used-car retailer, CarMax is expected to report its fiscal second-quarter earnings of $1.95 per share, which represents year-over-year growth of about 9% from $1.79 per share seen in the same period a year ago.

The Richmond, Virginia-based used car giant would post year-over-year revenue growth of over 28% to $7.0 billion from $5.37 billion seen a year earlier. For four quarters in a row, the company has exceeded expectations on earnings per share with an average surprise of over 38%.

“CarMax’s omni-channel offerings to improve the customer shopping experience and opening of new stores will fuel its growth prospects. (But) CarMax is likely to bear the brunt of rising SG&A expenses and Capex which might deteriorate its already weak balance sheet,” noted analysts at ZACKS Research.

CarMax’s better-than-expected results, which will be announced on Thursday, Sept 30, could help the stock hit new all-time highs. The company’s shares surged over 56% so far this year and it hit a record high of $146.91 on Monday.

Analyst Comments

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumers,” noted Adam Jonas, Equity Analyst at Morgan Stanley.

“KMX has consistently generated >$2,000 GPU and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omni-channel rollout.”

CarMax Stock Price Forecast

Four analysts who offered stock ratings for CarMax in the last three months forecast the average price in 12 months of $165.00 with a high forecast of $200.00 and a low forecast of $145.00.

The average price target represents a 13.61% change from the last price of $145.24. From those four analysts, three rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $165 with a high of $250 under a bull scenario and $63 under the worst-case scenario. The firm gave an “Overweight” rating on the used-car retailer’s stock.

Several other analysts have also updated their stock outlook. Wedbush raised the price target to $150 from $130. Guggenheim lifted the target price to $154 from $152. BofA Global Research upped the price objective to $200 from $150.

Check out FX Empire’s earnings calendar