CarMax (KMX) Stock Forecast & Price Target

CarMax reported significant growth in sales of older, higher mileage vehicles, which increased from 35% to 40% of total sales year-over-year, indicating strong demand in this segment. The company experienced a 9.3% increase in CAF income to $174.7 million, supported by effective underwriting and pricing adjustments where management noted a 100-150 basis point growth in CAF penetration during the quarter. Additionally, CarMax plans to increase advertising to boost awareness and promote pricing reductions, with advertising per retail unit rising by 48.2% year-over-year, suggesting a strategic approach to capturing a larger market share.

CarMax reported a notable decline in retail units, with an 8% year-over-year decrease in total retail sales and a 9% decline in used unit comps, highlighting weaker market performance than initially anticipated. Despite a retail average selling price (ASP) of $26.4K exceeding expectations, the company's retail gross profit per unit declined by 3% year-over-year, indicating pressure on profitability. Additionally, CarMax's wholesale gross profit per unit dropped by 11.4%, alongside a significant 16% year-over-year decline in other gross profit, contributing to a generally unfavorable financial outlook.