CarMax (KMX) Stock

CarMax Inc. NYSE: KMX is the biggest used car dealership in the United States. The company has over 245 locations across the country and is known for its "no-haggle" pricing approach when selling used cars.

KMX has a wide presence across the country and a strong logistics system, which, along with smart acquisitions and partnerships, improves its future opportunities. Their efforts in multiple sales channels also contribute to this growth.

CarMax's fiscal Q3 demonstrated positive unit sales and strong gross profit, contributing to a recovery in the previously sluggish industry. There was also an improvement in unit sales trends in December, although there are still concerns about interest rates and used car prices. I believe that KMX stock is fairly valued at around $92, providing a good margin of safety.

CarMax NYSE: KMX is facing challenges in 2024, but it is managing these tough conditions effectively by selling more cars than anticipated and maintaining a good profit margin. While the company isn't experiencing rapid growth, it is still expanding and preparing for better times when the economy improves.

CarMax's stock has increased by 10% in the last year, but it is now considered overpriced at 23 times its earnings, leading to a "sell" recommendation. Although the company has steady profit margins and careful spending, there are serious risks to its stock due to possible credit losses and its high valuation. Additionally, while CarMax's financing division is tightening credit standards, the current rate of loan delinquencies and low reserves are still worrying.

On Thursday at midday, key U.S. stock indexes rose after a drop the day before, as a report indicated that the U.S. economy grew more than expected in the third quarter.

In the second quarter of fiscal year 2025, CarMax, Inc. saw a small rise in revenues, exceeding expectations by $170 million due to higher sales volumes, even though prices were lower. Sales of used units at comparable stores grew by 4.3%, while total retail used vehicle sales went up by 5.4%, indicating good progress. Additionally, gross profit rose by 10.6% compared to the previous year, with retail gross profit per used unit remaining steady and wholesale gross profit per unit increasing by $54.

CarMax announced good results for the third quarter on December 19, showing a 5.4% rise in retail used car sales and a 6.3% increase in wholesale sales. Company leaders credited this success to effective operations throughout their business, particularly their omnichannel approach. CEO Bill Nash stated that this strategy has set them apart from competitors.

CarMax, Inc. (NYSE:KMX) will hold its Q3 2025 Earnings Conference Call on December 19, 2024, at 9:00 AM ET. The call will feature company representatives including David Lowenstein, Bill Nash, and Enrique Mayor-Mora, along with various participants from financial institutions. The operator will welcome everyone to the call and thank them for their patience.