UPDATE: Goldman Sachs Reiterates Buy Rating, Raises PT on CarMax
In a report published Friday, Goldman Sachs Group reiterated its Buy rating on CarMax (NYSE: KMX), and raised its price target from $42.00 to $44.00.
Goldman Sachs noted, “We reiterate our Buy rating on KMX, and raise our 12-month target by $2 to $44. The firm operates a differentiated concept that is executing more effectively, and looks further poised to benefit from an improving backdrop for its core late model used car category. We see this dynamic providing distinctive support against a tougher retail sector in 2013. KMX sharply exceeded our 3Q2012 sales and earnings estimates on better used car market growth, better conversion, and more aggressive credit offers. The wholesale business also perked up after some quiet quarters. We raise our operating income estimates sharply, but there is a trade-off in that credit earnings growth should slow as APRs fall, losses creep higher, and cost of funds have likely bottomed. These factors net out positively, as we basically raise our overall EPS forecasts to reflect the 3Q beat, and the composition is of higher quality, i.e., less attributable to credit. We note that the 4Q profit compare is tougher, and earnings growth is likely to slow for a quarter. But we see it getting back to the teens next year, supporting our recommendation.”
CarMax closed on Thursday at $37.97.
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