On Friday, Truist Securities adjusted its price target on shares of CarMax (NYSE:KMX), the nation's largest retailer of used vehicles, to $70.00, up from the previous target of $66.00. The firm has decided to maintain a Hold rating on the stock.
The revision follows CarMax's first-quarter performance, which met the subdued expectations set by both the firm and investors. Although there was a slight improvement in affordability, with average selling prices decreasing by approximately 3%, CarMax experienced a roughly 4% decline in comparable used unit sales. Additionally, sales per store are trailing approximately 15% behind the levels seen in 2019.
Management at CarMax reported that market share remained relatively stable year-over-year in the quarter. However, Truist Securities pointed out ongoing challenges in maintaining market share. These challenges include issues with pricing, which may be perceived as less competitive, potential shifts in consumer buying behavior, and changes in the sales mix.
Despite these headwinds, Truist Securities has slightly increased the price target. The report from Truist Securities concluded with a neutral stance on CarMax, signaling that while there are ongoing challenges, the firm does not see a significant change in the company's near-term prospects. The new price target of $70 reflects a modestly more optimistic outlook than the previous $66 target.
In other recent news, CarMax has been the subject of numerous adjustments in its stock outlook due to recent developments. Mizuho has lowered its price target for CarMax from $75.00 to $72.00, citing subdued used vehicle sales and market competition from Carvana. Meanwhile, Evercore ISI has maintained an In Line rating with a price target of $68.00, highlighting an expected surge in online activity and an upcoming event in Rocklin, California.
Truist Securities has also adjusted its outlook, reducing its price target from $66 to $72 due to high vehicle prices and market share issues. Similarly, Needham revised CarMax's stock target to $91 from $99, despite a shift in the expected timeline for industry recovery.
These adjustments come in the wake of CarMax's fiscal fourth-quarter earnings and amidst an evolving economic landscape. Despite the lowered price targets, several firms maintain a positive rating on CarMax's shares, indicating a continued belief in the company's potential for growth. These are recent developments reflecting a broad reassessment of CarMax's valuation and future prospects.
InvestingPro Insights
As CarMax (NYSE:KMX) navigates the complexities of the used vehicle market, real-time data from InvestingPro provides a deeper understanding of the company's financial health and market position. With a market capitalization of $11.25 billion, CarMax is trading at a price-to-earnings (P/E) ratio of 23.63, which aligns closely with the adjusted P/E ratio for the last twelve months as of Q4 2024 at 23.65. Notably, the company's gross profit margin during this period stood at 11.63%, a figure that reflects the challenges highlighted by Truist Securities regarding pricing competitiveness.
InvestingPro Tips suggest that CarMax operates with a significant debt burden and suffers from weak gross profit margins. However, it remains a prominent player in the Specialty Retail industry and its liquid assets exceed short-term obligations. Analysts predict that the company will be profitable this year, a sentiment supported by its profitability over the last twelve months. For investors considering a deeper dive into CarMax's financials and stock performance, InvestingPro offers additional tips, with a total of 7 more tips available to help inform investment decisions. For those interested in gaining access to these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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