On Friday, Mizuho maintained its Neutral stance on CarMax (NYSE 🙂 with a steady price target of $72.00. The auto retailer saw a notable turnaround, with its stock closing up 5% after initial pre-stock concerns. The change in investor sentiment was attributed to CarMax’s continued sales momentum through September and signs that the company could regain its market share.
CarMax’s performance in the third quarter has been a mix of challenges and positive developments. According to Mizuho’s analysis, comparable sales of used units are expected to be slightly below 4% once the impact of an unfavorable daily mix is taken into account. Comparable sales are currently estimated to be in the low single-digit percentage range. Additionally, CarMax has adjusted its loss provision by approximately $52 million for existing loans, which is notably higher than the typical range of $20 to $25 million.
Despite the current quarter’s adjustments, CarMax management, including CEO Bill Nash and Auto Finance Senior Vice President Jon Daniels, have expressed confidence in achieving positive comparable sales. They anticipate this will lead to more significant savings and general management leverage (SG&A) in the second half of fiscal 2024. Mizuho remains cautious about fully supporting a fundamental recovery for CarMax given the increasing credit pressures facing the company.
More insight into CarMax’s strategy and financial outlook is expected to be shared during the company’s investor day in mid-October. This event is likely to provide more detailed information on how CarMax is navigating current market conditions and its plans for the future.
In other recent news, CarMax has seen several important developments. Following the company’s mixed second-quarter results, RBC Capital Markets raised its price target on CarMax to $82 from $75, maintaining an Outperform rating. The company saw a 4.3% increase in comparable retail unit sales and consistent gross profit per unit, offset by a roughly 14% year-over-year decline in CarMax Auto Finance revenue. Evercore ISI also raised its price target to $79 from $76, while expressing concern about higher credit losses that could lead to tighter credit conditions.
Meanwhile, CFRA analyst Garrett Nelson maintained a Buy rating on CarMax with a stable $100 price target. Despite a slight reduction in the fiscal 2025 earnings per share estimate, the fiscal 2026 estimate remains unchanged at $4.10. CarMax reported August quarter earnings of $0.85 per share, up 13% from the year-ago period, and net sales declined marginally 0.9% to $7.01 billion.
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