On Friday, CarMax Inc . (NYSE:KMX) received an updated price target from an analyst at Needham following the company's second-quarter performance. The new price target has been set at $90.00, an increase from the previous $87.00, while the Buy rating remains unchanged.
CarMax reported a significant beat on consensus retail unit estimates, marking their best same-store sales performance since February 2020, after adjusting for the unusual comparisons due to COVID-19 impacts in 2021 and fiscal year 2022. The analyst pointed out that CarMax has started to regain market share and is well-positioned to capitalize on its leadership and omnichannel investments as the industry anticipates a multi-year recovery.
Despite challenges in the CarMax Auto Finance segment, where loan loss provisions remain a contentious issue, the analyst noted that investors' confidence in CarMax's ability to navigate these difficulties has strengthened. This comes after the company reported in-line results, even with higher loan loss provisions.
The revised $90 price target is based on a 20-times multiple of the firm's projected earnings per share (EPS) for the fiscal year 2026. This valuation reflects the analyst's view that CarMax is currently operating in what appears to be a trough for both the company and the broader industry.
In other recent news, CarMax, the nation's largest used car retailer, has seen several significant developments. The company reported a slight decrease in total sales to $7 billion in the fiscal second quarter of 2025, a 1% drop year-over-year. However, the company saw a 5.1% increase in retail unit sales. 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.
Analysts' views on CarMax have varied. Mizuho maintained its Neutral stance with a price target of $72, citing concerns about increasing credit pressures faced by the company. RBC Capital Markets raised its price target to $82, maintaining an Outperform rating, and noted a 4.3% increase in comparable retail unit sales. Evercore ISI increased its price target to $79, while expressing concerns over higher loan losses potentially leading to tighter credit conditions. CFRA analyst Garrett Nelson maintained a Buy rating with a steady price target of $100.
CarMax is also testing new credit scoring models and plans to centralize logistics operations. These are recent developments that investors should be aware of.
InvestingPro Insights
As CarMax Inc. (NYSE:KMX) navigates through its recovery phase, current InvestingPro data and tips highlight several key points that investors should consider. The company's market capitalization stands at $11.63 billion, with a P/E ratio of 30.54, reflecting a premium valuation in the market. The adjusted P/E ratio for the last twelve months as of Q2 2025 is slightly lower at 29.24. Despite recent challenges, CarMax's revenue for the last twelve months as of Q2 2025 reached $27.679 billion, although it experienced a slight decline of 3.03%.
InvestingPro Tips suggest caution, noting that analysts have revised their earnings expectations downwards for the upcoming period and anticipate a sales decline in the current year. However, CarMax is recognized as a prominent player in the Specialty Retail industry, with liquid assets that exceed short-term obligations, indicating financial stability. Additionally, while the company is trading at high EBIT and EBITDA valuation multiples, analysts remain optimistic about its profitability this year.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips on CarMax's financial health and future outlook. There are 9 more InvestingPro Tips available, which can be accessed for CarMax at https://www.investing.com/pro/KMX.
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