Rajat Gupta CFA, an analyst from J.P. Morgan, maintained the Sell rating on CarMax (KMX – Research Report). The associated price target remains the same with $65.00.
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Rajat Gupta CFA has given his Sell rating due to a combination of factors affecting CarMax’s stock. The recent performance of CarMax shares, following announcements related to auto tariffs, has shifted the risk-reward balance unfavorably. While there is potential for a temporary boost in demand and gross profit per unit due to tariff-driven substitution, this is expected to be short-lived. The used car industry is currently facing supply challenges, and any demand increase is likely to be temporary, with affordability issues anticipated to impact demand in the latter half of the year and into 2026.
In addition, CarMax’s current valuation is already near long-term averages, and the company’s ability to maintain recent market share gains is uncertain. The medium-term outlook is further clouded by potential negative impacts from tariffs, which could hurt industry volumes and CarMax’s reliance on younger vehicle supply. The anticipated benefits from omni-channel initiatives have yet to significantly impact growth rates, and the stock’s current trading levels do not align with historical earnings and margin profiles. As a result, the risk-reward profile remains unattractive compared to peers, leading to the Sell rating.
Based on the recent corporate insider activity of 58 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of KMX in relation to earlier this year.