Morgan Stanley Analyst Reiterates Positive Outlook: Q4 Bottom Line Driven by Strong Cost Management Strategy

  • Morgan Stanley analyst Adam Jonas reiterated an Outperform rating on CarMax Inc KMX and a price target of $75 following the announcement of fourth-quarter 2023 results
  • The analyst believes the results reflect management's effective cost management strategy, with lower than expected cost of goods sold and SG&A expenses.
  • The analyst notes a decline in CAF income in Q4 on higher provisions and lower NIM and will monitor CAF income performance in 2024. 
  • The company anticipates price movements and a gradual shift in CAF's cost of funds to drive the total interest margin to stabilize in FY24. 
  • Jonas believes the company to benefit from its strong omnichannel strategy, higher same-store sales, and market share gains in the near term.
  • He sees strong competition, increased advertising and logistics expenses, and unfavorable used car prices as a matter of concern for the company in the near term.
  • Price Action: KMX shares are trading higher by 10.60% at $72.84 on the last check Tuesday.
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