KMX: Future Recovery Will Rely on Easing Loan Loss Pressures

CarMax's analyst price target has been lowered significantly, with the consensus now reflecting a cut of more than $20 per share. Analysts cite continued earnings misses, weaker retail sales, and growing uncertainty around the company’s recovery outlook.

Analyst Commentary

Analysts remain divided on CarMax, with recent research highlighting a mix of cautious outlooks and areas of underlying strength. The following summarizes the most significant bullish and bearish themes featured in recent reports.

• Bullish analysts note that some of CarMax’s headwinds, such as elevated loan losses, may be largely confined to older loan vintages. This suggests potential stabilization ahead.
• Despite recent retail sales setbacks, there is optimism that certain disruptions may have been one-time events. This could offer room for recovery in unit growth over the medium term.
• Some analysts highlight that CarMax remains a valuable asset with potential for long-term value creation if management executes well on strategic initiatives.
• Selective forecasts anticipate a more balanced outlook in future quarters, particularly if consumer confidence rebounds and macro trends improve.

• Bearish analysts see persistent uncertainty around CarMax’s ability to restore consistent earnings growth and retail sales momentum. Many have adjusted price targets lower as a result.
• Recent results showing declines in both sales and earnings have heightened concerns that CarMax may be entering a new, extended downside phase, with limited near-term catalysts for recovery.
• Several experts voice worries over ongoing share losses to competitors and a lack of a clear strategic plan to unlock value, raising the risk of further performance deterioration.
• The company’s weak Q2 performance, especially missed targets across all key metrics, is amplifying doubts about management’s ability to sustain market leadership.

What's in the News

• CarMax announced significant leadership changes, naming David McCreight as Interim President and CEO effective December 1, 2025. Bill Nash will step down from the role (Key Developments).
• The company provided earnings guidance for its third quarter ending November 30, 2025, projecting a comparable store used unit sales decrease of 8% to 12% and net earnings per diluted share between $0.18 and $0.36. The outlook is impacted by non-recurring expenses tied to leadership changes and workforce reductions (Key Developments).
• A class action lawsuit has been filed against CarMax, alleging the company overstated growth prospects and misled investors regarding business performance between June 20 and September 24, 2025 (Key Developments).
• CarMax was dropped from the S&P 500 and multiple related indices. The company was subsequently added to the S&P 600 and S&P 1000, reflecting changes in its index composition (Key Developments).
• From June 1 to August 31, 2025, the company repurchased 2.92 million shares for $180.02 million as part of its long-term share buyback program (Key Developments).

Valuation Changes

• Fair Value Estimate has edged down slightly to $54.64 per share from $55.50, reflecting updated outlooks.
• Discount Rate has risen slightly to 12.5% from 12.32%, indicating greater perceived risk in the valuation model.
• Revenue Growth expectations have fallen further, with the annual rate declining to -0.48% from -0.30%.
• Net Profit Margin has improved modestly, increasing to 3.44% from 3.39%.
• Future P/E Ratio has decreased marginally to 10.29x from 10.52x, reflecting a slight adjustment in earnings valuation.