CarMax Shares Slump Nearly 9% After Earnings Disappoint

CarMax shares slumped nearly 9% in pre-market trading on Thursday after the Richmond, Virginia-based used-car giant reported lower-than-expected earnings in the fiscal second quarter.

The United States’ largest used-car retailer reported quarterly adjusted earnings of $1.72​​ per share, missing the Wall Street consensus estimates of $1.90 per share.

Following this, CarMax shares slumped 8.66% to $133.81 in pre-market trading on Thursday.

CarMax said its revenue jumped nearly 50% to $7.99 billion from a year earlier, above the market expectations of $6.87 billion.

The company said its retail used unit sales increased 6.7% to a second-quarter record of 231,797 vehicles and comparable store unit sales increased 6.2% compared with the same quarter a year ago. Wholesale units increased 41.4% to 188,098 vehicles from the prior year second quarter, an all-time high quarterly record.

The company will release its results for the third quarter ending November 30, 2021, on Wednesday, December 22, 2021.

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 omnichannel rollout.”

CarMax Stock Price Forecast

Three analysts who offered stock ratings for CarMax in the last three months forecast the average price in 12 months of $175.00 with a high forecast of $200.00 and a low forecast of $150.00.

The average price target represents a 31.33% change from the last price of $133.25. From those three analysts, two 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.

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