CarMax (KMX) Stock Forecast & Price Target

CarMax has demonstrated solid growth in the sale of older, higher mileage vehicles, which increased from 35% to 40% of total sales year-over-year, indicating an expanding market share in this segment. The company has also seen a notable increase in CarMax Auto Finance (CAF) income, which rose by 9% year-over-year to $175 million, driven by improved underwriting and pricing adjustments. Furthermore, with a targeted increase in advertising to enhance market presence and a projected revenue of $5.7 billion for the upcoming quarter, CarMax is positioning itself for continued growth and greater market penetration.

CarMax experienced a significant decline in retail units, with an 8% year-over-year decrease and used unit comps falling by 9%, which exceeded management's preliminary guidance range. Although the retail average selling price (ASP) of $26.4K was approximately 2% above expectations, retail gross profit per unit still diminished by 3% year-over-year to $2.2K, indicating pressure on profitability. Additionally, CarMax reported a 7% year-over-year decline in third-quarter retail sales, totaling $4.5 billion, while other gross profits dropped by 16%, contributing to an overall negative outlook on the company's financial health.