CarMax’s Stock Is Well Worth Watching Ahead of Q3 Earnings; Target Price $158

The used-car retailer CarMax is expected to report its fiscal third-quarter earnings of $1.49 per share, which represents year-over-year growth of about 5% from $1.42 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 nearly 50% to $7.63 billion in the quarter ended November 2021. In the last two years, the company has exceeded expectations on earnings per share with an average surprise of over 80%.

“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.

It is worth noting that better-than-expected results, which will be announced on Wednesday, Dec 22 before the bell, could help the stock recoup recent losses. At the time of writing, CarMax stock was traded 1.5% higher at $144.10 on Thursday. It soared over 50% so far this year.

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 Omni channel 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

Nine analysts who offered stock ratings for CarMax in the last three months forecast the average price in 12 months of $158.43 with a high forecast of $165.00 and a low forecast of $150.00.

The average price target represents a 10.32% change from the last price of $143.61. Of those nine analysts, seven rated “Buy”, two 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 IT Services company’s stock.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $160 from $140. Wedbush lifted the target price to $160 from $135. In October, RBC lowered the target price to $156 from $160.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

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