CarMax stock rating reiterated at Outperform by Evercore ISI

Investing.com - Evercore ISI has reiterated an Outperform rating on CarMax (NYSE:KMX) with a price target of $85.00, highlighting several growth levers for the used car retailer. The company, currently trading near its 52-week low at $62.24 and commanding a market cap of $9.34 billion, appears undervalued according to InvestingPro analysis.

The firm believes CarMax is positioned to gain market share in the second half of 2025 through its expansion into the 10-year-old and older vehicle market, which offers more affordable options and could boost close rates. With annual revenue of $28.67 billion and a healthy current ratio of 2.39, the company has strong financial backing for this expansion.

Evercore ISI notes that CarMax’s omnichannel retail approach remains underappreciated by consumers, suggesting the company’s new marketing campaign should increase awareness of these capabilities.

The research firm points to CarMax Auto Finance (CAF) expansion as another growth driver, projecting that increasing penetration to over 50% could boost total company EPS power by 5-10% over the next 18-24 months, though loan losses may increase as well.

Near-term challenges identified include potential market share slippage, vehicle affordability concerns particularly if tariffs persist, and rising delinquencies that could impact credit availability and loan loss provisioning. InvestingPro subscribers can access 10+ additional exclusive insights and a comprehensive analysis of CarMax’s financial health and growth potential through the Pro Research Report.

In other recent news, CarMax reported first-quarter results that exceeded market expectations, leading to a rise in its stock. The company’s management expressed confidence in its digital capabilities and plans to increase advertising for its omnichannel strategy. Mizuho (NYSE:MFG) raised its earnings estimates for CarMax, projecting $4.10 for fiscal year 2025 and $4.85 for 2026, despite lowering the stock’s price target to $78 due to market challenges. Meanwhile, Morgan Stanley (NYSE:MS) assumed coverage with an Overweight rating and an $80 price target, citing CarMax’s operational improvements and growth potential. RBC Capital also raised its price target to $81, highlighting positive surprises in sales and profit metrics, but noted macroeconomic uncertainties that might affect future trends. Truist Securities increased its target to $74, acknowledging a solid first-quarter performance but cautioning about tougher comparisons ahead. Analysts from these firms have various outlooks on CarMax’s future, reflecting both optimism about its strategies and concerns about market conditions.

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