Wachovia Downgrades CarMax (KMX) to Underperform

April 3, 2009 8:01 AM EDT

Wachovia downgrades CarMax, Inc. (NYSE: KMX) to Underperform. Revised valuation range is $7-$8.50

Wachovia analyst says, "The "good" news is in the stock and there are more negative catalysts than positive ones going forward, in our opinion. Q4 was the best of all worlds for gross profit $/unit and CAF gain spread. The positive catalysts have largely been exhausted. We were surprised to hear traffic has not improved materially given recent industry data on used sales. We believe increased competition from franchised dealers and greater availability of CPO vehicles have marginalized KMX’s competitive edge (market share was down this quarter). We believe high new vehicle inventories are likely to continue into the summer months, which should lead to further discounting. Also, we believe any kind of federal scrappage legislation would target new vehicles only. Finally, the stock’s outperformance (68% ytd vs. -8% for the SPX) and current valuation (38x FY2011E, 351% of the SPX) suggest there is more downside than upside especially considering fundamentals."

To see more analyst ratings on KMX Click Here.

CarMax, Inc. (CarMax) is a holding company and its operations are conducted through its subsidiaries. CarMax is a retailer of used cars, which retailed 377,244 used vehicles during the fiscal year ended February 29, 2008 (fiscal 2008).

Related Categories

Downgrades

Stocks Mentioned

Related Entities

• Wachovia

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?