Deutsche Bank Upgrades CarMax (KMX) to Buy

May 28, 2009 7:34 AM EDT

Deutsche Bank upgrades CarMax (NYSE: KMX) from Hold to Buy.

Deutsche analyst says, "The combination of vastly stronger demand and contracting spreads on Auto ABS deals has mitigated one of our key concerns: That captive (non-bank) finance co's such as Carmax Auto Finance might be structurally impaired. Improving liquidity and lower borrowing costs suggest that this business can once again become an important contributor to KMX earnings (as well as a support to sales)...April deal appears profitable, and the market is now even better. After historically outperforming the used car market, KMX appears to have underperformed the overall used industry over the past 3 quarters. We believe that this was partly attributable to segment mix (lower priced, older vehicles have already begun to recover, and "newer used" vehicles have lagged). While we anticipate near-term volatility, we believe that fundamentals could improve significantly over the next 6-12 months as automaker capacity consolidates, and the new vehicle market shifts from deflationary to inflationary pricing; particularly positive for the type of recent vintage used cars that represent KMX's specialty."

To see more analyst ratings on KMX Click Here.

CarMax, Inc. is a holding company and its operations are conducted through its subsidiaries. The Company is a retailer of used cars, which retailed 345,465 used vehicles during the fiscal year ended February 28, 2009 (fiscal 2009).

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