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Evercore ISI maintained its Outperform rating and $80.00 price target on CarMax (NYSE:KMX) ahead of the company’s earnings report scheduled for Friday. Currently trading at $64.40, near its 52-week low of $61.34, the stock has declined 17% on the day of its previous quarterly earnings release. InvestingPro data shows four analysts have revised their earnings estimates downward for the upcoming period, reflecting the fairly negative sentiment heading into this report.
The analyst expressed concern that comparable sales may decline in the low single digits in June, compared to Street expectations of approximately 4% growth for the coming quarters. Evercore attributes recent volatility to tariff pull-ahead effects and the cycling of CDK disruption from last year, which could create a potential 50-150 basis point headwind in the second fiscal quarter.
Evercore outlined three strategic actions CarMax could take to improve performance: marketing, sourcing, and finance. With a market capitalization of $9.82 billion and annual revenue of $28.2 billion, CarMax maintains a modest gross profit margin of 12.34%. On marketing, the firm suggests CarMax could differentiate itself by addressing consumer tariff concerns and highlighting its omnichannel capabilities. For sourcing, the analyst recommends expanding inventory of older, more affordable vehicles, noting that cars over 10 years old currently represent less than 5% of CarMax’s inventory despite growing consumer demand.
The firm also suggests CarMax could benefit from increasing its subprime loan exposure by 200-400 basis points, which would likely boost comparable sales while still keeping the company below industry norms of 40-50% subprime penetration. Evercore believes this financing shift makes sense, especially since the market has already reacted negatively to perceived loan risk increases.
The analyst assigns approximately a one-in-five probability that these strategic options will be discussed in detail during Friday’s earnings call, and plans to explore these topics further during a deep dive with CarMax’s senior leadership team scheduled for July 16. For investors seeking deeper insights into CarMax’s financial health and strategic positioning, InvestingPro offers comprehensive analysis including 10+ additional ProTips and a detailed Pro Research Report, available as part of the platform’s coverage of 1,400+ US stocks.
In other recent news, CarMax has been the focus of several analyst updates and strategic partnerships. Evercore ISI lowered its price target for CarMax to $80 from $84, maintaining an Outperform rating, citing concerns over declining comparable sales and projecting earnings per share slightly below consensus. Similarly, RBC Capital Markets adjusted its price target to $80 from $103, also maintaining an Outperform rating, following strong fourth-quarter results but cautioning about higher loan loss provisions. Needham analysts have also revised their price target to $92 from $101, retaining a Buy rating, while highlighting macroeconomic uncertainties affecting the used vehicle market.
In addition to analyst updates, CarMax renewed its partnership with Gotham FC, continuing as the front-of-kit sponsor to support women’s soccer. This collaboration aims to enhance fan experiences and community engagement, including digital content investments and youth soccer clinics. The partnership has already led to increased social media following and game attendance for Gotham FC. Despite these developments, CarMax faces challenges such as potential tariffs and economic factors impacting future performance. Analyst Michael Montani from Evercore ISI notes that CarMax’s operational improvements, including a widening price spread between new and used vehicles, could support future earnings growth.
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