Tariffs May Have Mixed Effects On Carmax, May Boost Used Car Demand Due To Pricier New Cars: Analyst

Truist Securities analyst Scot Ciccarelli reiterated a Hold rating on the shares of Carmax Inc KMX with a price forecast of $88.00.

CarMax delivered strong fourth-quarter results, with used vehicle same-store sales rising 5.1%, slightly below expectations but showing notable improvement from the prior quarter.

Average selling prices remained steady year over year, and unit volume aligned with projections. Adjusted earnings per share were estimated at $0.64, slightly above the expected $0.62.

The company reaffirmed its long-term targets but removed the specific timelines due to economic uncertainty. Tariffs are expected to have mixed effects on the business, said the analyst.

As a result, tariffs may boost used car demand due to pricier new cars, but they could also potentially price out some consumers.

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RBC Capital analyst Steven Shemesh maintained an Outperform rating on the shares and lowered the price forecast from $103 to $80.

CarMax outlined several encouraging developments. First-quarter same-store sales are trending in the high-single-digit range, with momentum building from February into March and April.

The company continues to improve operating efficiency, leveraging SG&A expenses by 770 basis points year over year to roughly 91% of gross profit.

Market share stabilized year over year, with gains in the second half of FY2025, particularly in the 0–4-year vehicle segment, said the analyst.

CarMax expects its loan loss provisions to rise 40%–50% in first-quarter, hitting around $68 million, due to seasonal factors and a shift back to retaining more subprime loan volume.

Management views this quarter as the likely peak, with future quarters remaining at the higher end of the $70–$105 million range, assuming stable lending conditions.

The company also broadened its definition of "omnichannel sales," now covering more customer interactions, raising the metric to 67% of retail sales.

Lastly, CarMax aims to increase CarMax Auto Finance penetration by 100–150 basis points by reclaiming previously outsourced loan originations.

Price Action: KMX shares closed higher by 2.87% at $68.36 at last check Friday.

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