CarMax Faces 'Acute' Shortage Problem, And It Might Last Through 2025

With industry sales decelerating at a faster pace than expected in May, CarMax Inc.'s KMX earnings estimate for the fiscal first quarter has been cut from $1.45 per share to $1.25 per share, though this is still higher than the consensus of $1.20, according to JPMorgan.

The CarMax Analyst: Analyst Rajat Gupta reiterated an Underweight rating and price target of $55.

The CarMax Thesis: The company is likely facing higher deceleration due to "acute" supply shortages of vehicles that are one to five years old, Gupta said in the note.

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He added that This trend will likely continue through the calendar year 2025 before improving.

"SS comps are likely to decelerate in F2Q based on normal seasonality" as well as tougher comps due to CDK outage benefits, the analyst wrote. CarMax also faces tougher comps in the back half of the year due to "hurricanes and post-election bump in demand," he further stated.

There are limited catalysts in the near- to medium-term that could drive estimates higher, Gupta said.

KMX Price Action: Shares of CarMax had risen by 1.28% to $65.76 at the time of publication on Monday.

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