CarMax Analyst Remains Relatively Constructive Despite Headwinds Confronting Used Car Market

Morgan Stanley analyst Adam Jonas reiterated an Overweight rating on the shares of CarMax Inc KMX and lowered the price target from $90 to $75.
The company reported a Q3 FY23 sales decline of 23.8% Y/Y to $6.5 billion, missing the consensus of $7.42 billion.
Despite the headwinds confronting the used car market, the analyst remains relatively constructive on KMX as earnings revisions have taken FY23forecasts to levels less than ½ that achieved pre-COVID.
The analyst's revised FY23 EPS forecast is 61% below the estimate of normalized EPS of $6.50.
CarMax has consistently generated over $2,000 GPU, is self-financing, and has one of the strongest balance sheets amongst the dealers.
Long term, the analyst estimates strong growth in same store sales along new store openings, allowing KMX to achieve operating leverage.
The analyst also recommends KMX as a 'hedge' vs. the analyst’s more cautious views across the franchise dealer complex and the car rental names which, while also highly leveraged to used car prices, have yet to see the impact hit earnings forecasts.
Also Read: 'It's Only Getting Worse' For Carvana, Analyst Says
Price Action: KMX shares are trading higher by 4.19% at $61.72 on the last check Thursday.
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