CarMax (KMX) Stock Forecast & Price Target

CarMax, as the largest used-vehicle retailer in the U.S., displayed notable financial resilience with a significant contribution from used-vehicle sales, representing 83% of fiscal 2025 revenue. In the same fiscal quarter, the company experienced a net interest margin (NIM) expansion of 50 basis points to 6.6%, coupled with a year-over-year increase of 60 basis points in the percentage of unit sales financed through its CarMax Auto Finance (CAF) segment. Despite a slight decline in market share, CarMax continues to strategically increase its store base and gain market share in the segment, indicating a positive trajectory for future growth.

CarMax experienced an 11% year-over-year decline in earnings from its CarMax Auto Finance division, primarily due to higher loan-loss provisions that offset any margin improvements. Additionally, the company reported significant weaknesses in its second quarter, with comparable sales down 6.3% year-over-year, retail volumes decreasing 5.4%, and a 26% increase in loan-loss provisions, indicating potential challenges ahead for profitability. Furthermore, the reduction in consumer-sourced inventory from 40-50% to 30% has forced CarMax to rely more on auction markets, negatively impacting profit margins and creating uncertainty about the company's growth trajectory.