CarMax Analyst Turns Bullish Ahead Of Earnings

Shares of CarMax, Inc KMX rose in early trading on Monday as the company gears up to report its quarterly earnings later this week.

The company seems to be heading towards an inflection in growth and market share performance, while profitability “continues to improve on enduring retail GPU strength and fixed cost leverage,” according to Wedbush.

The CarMax Analyst: Seth Basham upgraded the rating for CarMax from Neutral to Outperform, while raising the price target from $85 to $90.

The CarMax Thesis: The company’s underperformance versus the retail used car industry has narrowed “to an estimated 9 percentage points” in the fiscal second quarter, for which the results will be reported on Thursday, Basham said in the upgrade note.

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“Indeed, we look for modest unit comp upside to -7.5% in F2Q (vs. consensus -8.0%), but more importantly see comps turning positive in F3Q (+3% estimate) on easing comparisons and improving industry growth trends (~ +1% forecast by Cox),” the analyst wrote.

Despite seasonal pressures, the company “should be able to deliver retail GPU over $2,300 in F2Q ($2,320 estimate vs. consensus’ $2,308) and sustain retail GPU near $2,300 for the back half of the fiscal year,” Basham added.

KMX Price Action: Shares of CarMax had climbed 2.58% to $78.64 at the time of publication Monday.

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