CarMax (KMX) PT Raised to $79 at Evercore ISI
Evercore ISI analyst Michael Montani raised the price target on CarMax (NYSE: KMX) to $79.00 (from $76.00) while maintaining a In Line rating.
The analyst comments "CarMax F2Q results provided a tantalizing glimpse of stabilizing share and retail profit growth, with higher loan losses and a choppy low to middle income consumer backdrop the risk. 5% retail used unit growth shows CarMax kept pace with the industry in Jun-Aug as depreciation normalized and with benefits from CDK software disruptions for franchised dealer competitors, while retail profitability (measured by our CarMax Sales Ops vs CAF EPS) improved from $0.11 in C2Q23 to $0.30 in C2Q24. Higher loan loss experience is a concern as it shows CarMax is not immune to broader industry pressure and could lead to credit tightening and/or profit pressure if consumer pressures persist. We are raising our C24/25 EPS ~1% to $3.05 and $3.60 to reflect a F3Q comp of 2.5% (EVR est) as September results have proven more resilient than our web traffic data had indicated, and as 2Q results came in ahead of our estimate. Our Base Case increases to $79, or ~17x normalized EPS of ~$5.50 discounted back two years as we look for gradual share stabilization and improving underlying profitability despite what is likely to remain below trend EPS power into C25. Separately we removed our Positive Tactical Trade on CVNA given the stock has approached our $178 Base Case (+20% since our call) and to reflect choppy credit/consumer trends which we believe can weigh on the auto retail space broadly in the near term."