Truist Securities has updated its outlook on CarMax (NYSE: NYSE:KMX), increasing the price target to $75 from the previous $70 while keeping a Hold rating on the stock.
The adjustment comes after a notable uptick in used car sales, which surged by 21% year-over-year in August, as reported by Manheim data.
The firm's analyst cited the significant growth in used car sales as the primary reason for the revised second-quarter used unit comp estimate, which now stands at 3.0%, up from the previous forecast of roughly flat.
Despite this improvement from a -3.8% comp in the first quarter of the current calendar year, it is observed that sales per store are still about 8% lower than in 2019.
The persistently soft sales are attributed to ongoing affordability challenges, with monthly payments remaining over 35% higher compared to 2019, as well as potentially less competitive pricing and shifts in consumer buying behavior.
In addition to the updated sales estimate, the earnings per share (EPS) forecast for the second quarter has been raised to $0.88 from the prior $0.79, which is above the consensus of $0.83.
In other recent news, CarMax has been the subject of several significant developments. JPMorgan (NYSE:JPM) increased the price target for the company to $65, maintaining an Underweight rating due to challenges in omni-channel execution.
Despite a 7% decrease in total sales to $7.1 billion in Q1 Fiscal Year 2025, CarMax Auto Finance income saw a 7% year-over-year increase. CFRA upgraded CarMax's shares from Hold to Buy, reflecting an optimistic view of the auto dealership environment, and raised the fiscal year 2026 earnings per share (EPS) forecast to $4.10 from $3.75.
Mizuho maintained a Neutral rating on CarMax, citing recent used vehicle pricing trends that may impact the company's operations. Meanwhile, Needham kept a Buy rating but lowered the price target to $87.
In the company's 2024 Annual Meeting of Shareholders, ten directors were elected to the Board and KPMG LLP was ratified as the independent registered public accounting firm for fiscal year 2025.
InvestingPro Insights
Following the updated outlook by Truist Securities on CarMax (NYSE:KMX), the InvestingPro platform offers a nuanced perspective on the company's financial health and market position. CarMax is currently trading at a P/E ratio of 26.49 based on the last twelve months as of Q1 2025, which is reflective of its earnings relative to its share price. Despite a decrease in revenue growth of -6.31% over the same period, the company maintains a gross profit margin of 11.79%, indicating its capacity to generate earnings above its service costs.
InvestingPro Tips highlight that CarMax is a prominent player in the Specialty Retail industry and is expected to remain profitable this year, which aligns with the positive sentiment from analysts. However, it is important to note that CarMax does not pay dividends to shareholders, which may influence investment decisions for those seeking regular income. Additionally, while CarMax's stock price movements have been quite volatile, its liquid assets exceed short-term obligations, suggesting a solid financial footing for near-term operations.
For investors looking for a deeper dive into CarMax's financials and market performance, there are additional InvestingPro Tips available on the platform (https://www.investing.com/pro/KMX). These tips provide valuable insights into factors such as valuation multiples and profitability, which are pertinent when considering the company's stock for investment.
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