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CarMax's fair value estimate has been revised sharply lower, dropping from $76.93 to $57.79. Analysts point to mounting sales uncertainty, downward earnings revisions, and lack of visible turnaround strategies following weaker-than-expected Q2 results and multiple price target cuts across the Street.

Analyst Commentary

Following CarMax's recent quarterly results and downward valuation revisions, Wall Street analysts have offered a range of perspectives regarding the company's prospects. The commentary reflects diverging views on CarMax's potential for recovery, execution risks, and the evolving competitive landscape in used car retailing.

Bullish Takeaways

• Bullish analysts highlight the company's underlying asset value and note that recent earnings disappointments may be partially attributable to one-time or short-term issues within specific loan vintages.
• Some foresee a potential recovery in unit growth, suggesting that unit declines in the latest quarter could reverse if macro conditions stabilize or CarMax implements targeted operational improvements.
• Raised price targets from select major institutions indicate continued belief in CarMax's long-term value proposition, even while acknowledging recent execution shortfalls.
• Outperform and Buy ratings are maintained by a handful of firms, who see the company as well-positioned to benefit should loan losses moderate and retail trends recover.

Bearish Takeaways

• Bearish analysts express concern over the lack of a clear turnaround strategy or visibility into renewed growth, especially in the aftermath of disappointing sales and margin performance during Q2.
• There are fears of a new downside phase for CarMax, with risks of further year-over-year declines in both unit volume and retail gross profit per unit.
• Increased competitive pressures and supply headwinds are seen as likely to persist. Some analysts are reducing their financial forecasts through fiscal 2027 and applying lower valuation multiples to reflect these risks.
• Several price target reductions and rating downgrades highlight wariness over CarMax's ability to reclaim market leadership, with continued questions about management's response to ongoing challenges.

What's in the News

• CarMax completed the repurchase of 2,920,959 shares between June 1, 2025 and August 31, 2025. This brings the total shares repurchased under its ongoing buyback program to 109,170,862, representing 58.32% of shares and totaling $6.99 billion (Key Developments).
• CarMax, Inc. (NYSE:KMX) was dropped from the FTSE All-World Index (USD) (Key Developments).

Valuation Changes

• Fair Value Estimate has fallen significantly from $76.93 to $57.79, reflecting reduced confidence in future prospects.
• Discount Rate remains unchanged at 12.32%, indicating no shift in risk assumptions by analysts.
• Revenue Growth forecast has declined sharply from a positive 1.88% to a contraction of -0.30%. This suggests a more challenging outlook for sales expansion.
• Net Profit Margin is slightly lower, adjusted from 3.52% to 3.39%. This signals modest compression in expected profitability.
• Future P/E Ratio has decreased from 13.17x to 10.79x. This implies a lower earnings multiple due to growth and earnings revisions.