CarMax (NYSE:KMX) Shares Gap Down - Here's Why

Key Points

• CarMax shares gapped down in premarket trading, opening below the prior close and falling about 7% as investors reacted to the latest earnings release.
• The company posted a strong fiscal Q1 beat, with EPS of $1.31 versus the $0.94 estimate and revenue of $8.01 billion versus $7.42 billion expected.
• Despite the beat, margin pressure and pricing cuts remain a concern, and several reports say investors are questioning whether CarMax’s new strategy can sustain growth and profitability.

CarMax, Inc. (NYSE:KMX - Get Free Report) shares gapped down prior to trading on Wednesday . The stock had previously closed at $52.11, but opened at $49.97. CarMax shares last traded at $48.8740, with a volume of 1,799,592 shares trading hands.

Trending Headlines about CarMax

Here are the key news stories impacting CarMax this week:

• Positive Sentiment: CarMax reported fiscal Q1 earnings of $1.31 per share, well above the $0.94 analyst estimate, and revenue of $8.01 billion also topped expectations. Article Title
• Positive Sentiment: Management highlighted a new strategic framework under CEO Keith Barr, and the company said higher used-vehicle prices and stronger wholesale demand helped drive the revenue beat. Article Title
• Positive Sentiment: Truist Financial raised its price target on CarMax to $47 from $37, reflecting improved expectations even while keeping a Hold rating. Article Title
• Neutral Sentiment: Several market reports note that the stock reacted to the earnings release and early investor focus is on whether the company’s strategy can sustain growth and improve profitability. Article Title
• Negative Sentiment: Profitability remains under pressure because CarMax used price cuts to support sales, which weighed on margins and offset some of the benefit from stronger revenue. Article Title
• Negative Sentiment: Despite the earnings beat, some coverage says investors are selling the stock because pricing strategy and margin pressure raised concerns about the durability of earnings growth. Article Title

Analysts Set New Price Targets

Several brokerages have weighed in on KMX. Bank of America began coverage on CarMax in a report on Wednesday, April 15th. They issued an "underperform" rating and a $40.00 price target for the company. UBS Group began coverage on CarMax in a report on Wednesday, May 27th. They issued a "neutral" rating and a $42.00 price target for the company. Argus upgraded CarMax to a "hold" rating in a report on Thursday, April 16th. Barclays boosted their price target on CarMax from $26.00 to $31.00 and gave the company an "underweight" rating in a report on Friday, June 12th. Finally, Weiss Ratings reiterated a "sell (d)" rating on shares of CarMax in a report on Wednesday, April 8th. One analyst has rated the stock with a Buy rating, fourteen have assigned a Hold rating and five have assigned a Sell rating to the company. According to data from MarketBeat.com, the company currently has an average rating of "Reduce" and a consensus target price of $42.40.

CarMax Trading Down 7.2%

The firm has a market capitalization of $6.86 billion, a price-to-earnings ratio of 30.21, a P/E/G ratio of 1.97 and a beta of 1.21. The company has a debt-to-equity ratio of 2.93, a quick ratio of 0.49 and a current ratio of 2.20. The business has a fifty day moving average price of $42.26 and a 200 day moving average price of $42.39.

CarMax (NYSE:KMX - Get Free Report) last released its quarterly earnings data on Wednesday, June 17th. The company reported $1.31 EPS for the quarter, topping analysts' consensus estimates of $0.94 by $0.37. The business had revenue of $8.01 billion during the quarter, compared to the consensus estimate of $7.42 billion. CarMax had a return on equity of 7.00% and a net margin of 0.96%.The business's revenue for the quarter was up 6.2% on a year-over-year basis. During the same period in the prior year, the firm posted $1.38 EPS. As a group, equities analysts forecast that CarMax, Inc. will post 2.3 earnings per share for the current year.

Institutional Trading of CarMax

A number of institutional investors have recently added to or reduced their stakes in KMX. MIRAE ASSET GLOBAL ETFS HOLDINGS Ltd. boosted its position in CarMax by 0.6% during the 1st quarter. MIRAE ASSET GLOBAL ETFS HOLDINGS Ltd. now owns 31,389 shares of the company's stock worth $2,446,000 after purchasing an additional 173 shares during the period. Jones Financial Companies Lllp boosted its position in CarMax by 3.1% during the 1st quarter. Jones Financial Companies Lllp now owns 5,372 shares of the company's stock worth $419,000 after purchasing an additional 161 shares during the period. Empowered Funds LLC boosted its position in CarMax by 12.5% during the 1st quarter. Empowered Funds LLC now owns 5,273 shares of the company's stock worth $411,000 after purchasing an additional 585 shares during the period. Intech Investment Management LLC boosted its position in CarMax by 61.7% during the 1st quarter. Intech Investment Management LLC now owns 19,143 shares of the company's stock worth $1,492,000 after purchasing an additional 7,307 shares during the period. Finally, Acadian Asset Management LLC purchased a new position in CarMax in the 1st quarter valued at about $727,000.

About CarMax

CarMax NYSE: KMX is a leading retailer of used vehicles in the United States, offering customers a streamlined, no-haggle purchasing experience. The company's inventory spans a broad range of makes and models, each of which undergoes a comprehensive inspection process before being offered for sale. Customers can shop in person at CarMax's retail locations or browse the company's online platform, which provides detailed vehicle histories, virtual tours and contactless purchasing options.

Originally launched in 1993 as a division of Circuit City, CarMax became an independent, publicly traded company in 1997.

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