Sterne Agee CRT Downgrades CarMax (KMX) to Neutral

Sterne Agee CRT downgraded CarMax (NYSE: KMX) from Buy to Neutral, saying a tough competitive environment will cap the multiple.

Analyst Ali Faghri commented, "While we remain positive on the long-term growth potential, near-term competitive pressures are more pronounced than we initially expected. Notably, KMX's comps are unlikely to recover in the short-run as public dealer peers price aggressively and accept margin declines to grow their service backlog. Moreover, limited supply of late-model SUVs remains a headwind and ~15% third-party subprime exposure will likely add further volatility as some lenders tighten underwriting standards. Simply put, while our earnings outlook is only modestly reduced, we now believe the market is unlikely to assign a higher multiple to KMX shares in this backdrop, limiting upside and warranting a Neutral rating."

For an analyst ratings summary and ratings history on CarMax click here. For more ratings news on CarMax click here.

Shares of CarMax closed at $48.83 yesterday.

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