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On Thursday, Truist Securities adjusted its outlook on CarMax (NYSE:KMX), reducing the price target from the previous $88.00 to $72.00, while sustaining a Hold rating on the stock. Currently trading at $66.43, near its 52-week low of $65.83, the $10.33 billion specialty retailer's revision followed fourth-quarter performance, which, according to Truist Securities, was solid, although used unit comp sales slightly missed expectations, posting a 5.1% increase compared to the forecasted 7.0%. Earnings for the quarter were roughly in line with projections. According to InvestingPro, CarMax shows several key indicators worth monitoring, with 10 additional exclusive ProTips available for subscribers.
The analyst from Truist Securities noted that quarter-to-date comp trends have shown acceleration, currently running at a high single-digit rate. Despite maintaining a healthy current ratio of 2.3 and generating $27.8 billion in revenue, CarMax has decided to remove the timeframe from its long-term goals, which included surpassing two million unit sales, citing macroeconomic uncertainty. The original timeframe for these goals was set between fiscal years 2026 and 2030.
The report further detailed that while sales have accelerated, potential initial tailwinds from tariffs could be offset as consumers might find themselves priced out of the new car market. This situation may lead to a rise in used car prices, which could, in turn, create a headwind to sales. The analyst expressed that although near-term trends appear solid, CarMax is likely to encounter a complex mix of factors due to tariffs and market share challenges that persist.
In summary, Truist Securities' position is that while CarMax has shown positive near-term trends, the company is facing a combination of potential benefits and challenges ahead. The revised price target reflects these considerations, as CarMax navigates through the uncertainties of the macroeconomic environment and the automotive market dynamics.
In other recent news, CarMax Inc . reported its fourth-quarter fiscal year 2025 earnings, revealing earnings per share (EPS) of $0.58, which fell short of the forecasted $0.65. Despite this, the company achieved a 7% year-over-year increase in total sales to $6 billion. The revenue slightly surpassed the forecast of $5.93 billion, offering a positive note amid the EPS miss. CFRA analyst Garrett Nelson upgraded CarMax stock to Strong Buy, although he adjusted the price target downwards to $95 from $115. The analyst noted a revised 12-month target based on a price-to-earnings ratio of 19.6 times, which is a discount to CarMax's historical five-year mean. CarMax also demonstrated strong growth in digital sales, up 25% for the fiscal year, and announced plans to expand with new store locations and reconditioning centers. Additionally, during the quarter, CarMax repurchased $99 million of its stock, reflecting its strategic focus on enhancing shareholder value. Despite macroeconomic uncertainties, CEO Bill Nash expressed confidence in the company’s growth prospects, emphasizing the strategic focus on expanding market share and enhancing digital sales capabilities.
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