On Friday, Mizuho maintained its Neutral stance on CarMax (NYSE:KMX) with a consistent price target of $72.00. The automotive retailer experienced a notable turnaround, with its stock closing up 5% after initial pre-market concerns. The shift in investor sentiment was attributed to CarMax's sustained sales momentum through September and indications of the company potentially regaining its market share.
CarMax's third-quarter performance has been a mix of challenges and positive developments. According to Mizuho's analysis, used-unit comparable sales are expected to be slightly below 4% once the impact of an unfavorable day mix is accounted for. Currently, comparable sales are 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 $20 million to $25 million range.
Despite the current quarter's adjustments, CarMax management, including CEO Bill Nash and SVP of Auto Finance Jon Daniels, has expressed confidence in achieving positive comparable sales. They anticipate that this will lead to more significant savings and general administrative (SG&A) leverage in the second half of fiscal year 2024. Mizuho remains cautious about fully endorsing a fundamental recovery for CarMax due to increasing credit pressures faced by the company.
Further insights into CarMax's strategy and financial outlook are expected to be shared during the company's investor day in mid-October. This event will likely provide more detailed information on how CarMax is navigating the current market conditions and its plans for the future.
In other recent news, CarMax has seen several significant developments. Following the company's mixed second-quarter results, RBC Capital Markets raised its price target for CarMax to $82 from $75, maintaining an Outperform rating. The firm noted a 4.3% increase in comparable retail unit sales and a consistent gross profit per unit, offset by a roughly 14% year-over-year decline in income from CarMax Auto Finance. Evercore ISI also increased its price target to $79 from $76, while expressing concerns over higher loan losses potentially leading to tighter credit conditions.
Meanwhile, CFRA analyst Garrett Nelson maintained a Buy rating on CarMax with a steady price target of $100. Despite a slight reduction in the FY 2025 earnings per share estimate, the FY 2026 estimate remains unchanged at $4.10. CarMax reported earnings for the August quarter at $0.85 per share, a 13% increase from the same period the previous year, and net sales were marginally down by 0.9% to $7.01 billion.
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