Oppenheimer Remains Bullish on CarMax (KMX) After Meeting with Management
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Oppenheimer reiterated an Outperform rating and $66.00 price target on CarMax (NYSE: KMX) after meeting with management and clients. Overall, the tone of KMX suggests to that management is looking toward nearer term prospects for the chain. Management does not discuss business trends intra-quarter. However, CEO Bill Nash seems to be driving KMX to consider online opportunities among other services.
Analyst Brian Nagel commented, "We spent the past couple of days meeting clients in California with senior management of Outperform-rated CarMax (KMX). For a while, we have looked favorably upon the longer term competitive positioning and financial prowess of the KMX business model. Early in 2016, we lifted our rating on shares to Outperform (Jan. 12th at $46.99) upon a discounted valuation and prospects for better used car sales trends later in the year, as comparisons ease and industry headwinds abate. CarMax reported Q2 (Aug.) results on Sept. 21st and will release Q3 (Nov.) figures in late Dec. Management does not discuss business trends intra-quarter. Overall, the tone of KMX suggests to us that on the heels of improving used car sales trends in Q2 (used car unit comps +3.1%, +8.1% ex. third-party financed sub-prime), management is looking more opportunistically toward nearer term prospects for the chain. The combination of easier comparisons and a wave of off-lease vehicles set to hit the market implies that the used car sales backdrop for KMX is improving. Ongoing challenges in subprime are apt to continue to mask, at least somewhat, better core sales trends at the chain. New CEO Bill Nash seems to be driving KMX to better consider online opportunities and the benefits of an already well-established infrastructure in servicing the needs to consumers seeking online delivery, among other services. We believe that a finance pre-qualification test has resonated very well with consumers and is now set for rollout. KMX continues to evaluate options for unit expansion and remains committed to at least a base level of share repurchases."
Shares of CarMax closed at $51.51 yesterday.
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