CarMax (KMX) Stock Forecast & Price Target

CarMax experienced a strong performance in fiscal 2025, with used-vehicle sales accounting for 83% of its revenue, translating to retail and wholesale sales of approximately 789,050 and 544,312 vehicles, respectively. The company's CarMax Auto Finance (CAF) segment reported a noteworthy 9% year-over-year income growth to $175 million, supported by effective underwriting and pricing adjustments leading to increased penetration within the financing sector. Additionally, CarMax's strategic focus on older and higher mileage vehicles has driven sales growth, with these vehicles now representing over 40% of total quarterly sales, indicating a robust demand in this segment.

CarMax reported a decline in retail units by 8.0% year-over-year, with used unit comparisons falling by 9% year-over-year, which is concerning given management's preliminary guidance of a decline between 8% and 12%. Although the retail average selling price (ASP) was slightly higher than expectations at $26,400, the decrease in retail gross profit per unit of 3% year-over-year indicates ongoing margin pressures. Additionally, CarMax's acknowledgment of challenges in its go-to-market strategy—including price gaps, inefficiencies in sales preparation, and a difficult digital customer experience—contributes to a negative outlook for the company's near-term earnings performance.