America’s largest used car retailer CarMax, Inc. (KMX) delivered mixed second-quarter results, with earnings missing and revenue beating expectations. Following the news, shares plunged 12.6%, closing at $127.96 on September 30.
The company reported earnings of $1.72 per share, down 3.9% year-over-year, and missed analysts’ estimates of $1.90 per share. (See CarMax stock charts on TipRanks)
On a positive note, net revenue climbed 48.7% to $7.99 billion compared to the year-ago period and significantly outpaced the Street’s estimate of $6.9 billion. Sales growth was aided by an increase in average selling prices and a higher number of sold units. The company also mentioned that robust sales were driven by strong demand for used vehicles, solid execution, and omni-channel platform.
During the quarter, KMX sold a total of 419,895 units through both its retail and wholesale channels combined. Also, a total of 364,263 vehicles were bought from customers. The growth in unit sales was attributed to KMX’s online instant appraisal offering, through which the company has bought more than 350,000 cars within the past six months.
Bill Nash, President, and CEO of the company said, “We continue to make investments in growth and innovation for our customers’ benefit and remain on track to bring our fully self-service online experience to all of our retail consumers by the end of the fiscal year.”
Nash added, “We’ve intentionally built our omnichannel platform to give every customer the ability to progress to a sale or buy regardless of how they shop with us, which will enable sustainable growth and create meaningful long-term shareholder value.”
Recently, Wedbush analyst Seth Basham lifted the price target on the stock to $150 (17.2% upside potential) from $130 while maintaining a Hold rating.
After reviewing CarMax’s recent CarMax Auto Finance (CAF) data, Basham noted that CAF delinquency trends may have bottomed in August, but loss trends remain benign.
Overall, the stock has a Moderate Buy consensus rating based on 2 Buys and 1 Hold. The average CarMax price target of $175 implies 36.8% upside potential to current levels. Shares have gained 36.9% over the past year.
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