CarMax (KMX) Stock Forecast & Price Target

CarMax has experienced significant revenue growth, with used-vehicle sales accounting for 83% of fiscal 2025 revenue, supporting its status as the largest used-vehicle retailer in the United States, albeit with a modest 3.7% market share for vehicles aged 0-10 years. The company benefits from an omni-channel strategy that enables consistent market share gains and improved earnings profile, with a striking 25% year-over-year growth in gross profit from extended service plans and repair services. Additionally, industry trends show a recovery in used vehicle sales, with recent data indicating increases in sales volume, as consumers adapt to higher pricing, further strengthening CarMax’s financial outlook.

CarMax faces significant challenges due to elevated used vehicle prices and rising interest rates, which have deteriorated affordability and impacted unit comp growth, resulting in a roughly 9% decline in used units compared to CY3Q21. The company's asset-backed securities (ABS) portfolio has underperformed, increasing financing costs and limiting access for lower-tier customers, thereby negatively affecting retail unit sales. Additionally, CarMax's rising operating expenses against lower gross profits, coupled with shifts in consumer behavior toward competitors like Carvana and concerns over perceived competitive pricing, create a concerning outlook for its market position and financial performance.