CarMax (KMX) Stock Forecast & Price Target

CarMax, the largest used-vehicle retailer in the U.S., has retails sales generating 83% of its fiscal 2025 revenue, indicating a strong core business despite overall market share declines. The company's net interest margin (NIM) has expanded by 50 basis points to 6.6%, while CarMax Auto Finance (CAF) financed 42.6% of unit sales, reflecting improved loan performance and profitability in financing operations. Despite increased competition in the used vehicle market, CarMax is strategically positioned to profitably grow its store base and continues to make progress towards capturing a greater market share.

CarMax experienced an 11% year-over-year earnings decline in its Auto Finance segment, attributed to increased loan-loss provisions that overshadowed margin improvements. The company reported a significant drop in its stock value following disappointing second-quarter results, with comparable sales down 6.3%, retail volumes decreasing by 5.4%, and retail gross profit per unit declining by 7.6%, alongside a 26% increase in loan provisions. Management's revised expectations for flat to slightly down income, a stark contrast to previous growth forecasts, alongside deteriorating performance metrics, further contribute to a negative outlook on CarMax's stock.