Wedbush Remains Sidelined on CarMax (KMX) as Data Shows Pressure
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Wedbush reiterated a Neutral rating and $55.00 price target on CarMax (NYSE: KMX) following recent credit data. KMX acknowledged that a trend is emerging in the direction of rising off lease vehicles, which could reduce “wholesale auction prices, our vehicle acquisition costs and CAF recovery rates.” KMX wholesale volumes/prices/profits came under further pressure in F2Q and recovery rates also continued to decline sharply; Wedbush expects pressure to continue.
Anayst Seth Basham commented, "Recent credit data from CAF points to incremental weakening, including rising late-stage delinquencies, increased frequency of loss, and rising loss severity as wholesale used car supply jumps and prices decline. Falling prices will likely have repercussions beyond CAF, including declining wholesale sales/profits and softer retail sales as affordability weakens from tighter credit and lower trade-in currency. These cyclical headwinds, along with rising secular pressures, keep us NEUTRAL on KMX."
Shares of CarMax closed at $51.11 yesterday.
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