CarMax: Attractive Valuation but Uncertain Strategic Upside Supports Hold Rating

Needham analyst Chris Pierce has reiterated their neutral stance on KMX stock, giving a Hold rating today.

Chris Pierce has given his Hold rating due to a combination of factors tied to CarMax’s current positioning and future uncertainties. He views management’s renewed emphasis on sharper pricing as a potential catalyst for better sales volumes, especially in an omni-channel environment where the company does not need as much operating leverage to grow earnings. At the same time, the stock’s valuation appears attractive on an absolute basis, suggesting the shares are not expensive at current levels.
However, Pierce sees a lack of clarity around how aggressive pricing and the broader long-term strategy will ultimately translate into sustainable profit growth and multiple expansion. He believes investors will likely wait for clearer evidence of execution before re-rating the stock, particularly given that CarMax now faces its toughest competitive backdrop yet, shifting from taking share from traditional dealers to defending share against digital-first rivals. This blend of reasonable valuation but unclear upside potential underpins his decision to maintain a Hold rather than move to a more positive recommendation.

In another report released today, Mizuho Securities also maintained a Hold rating on the stock with a $36.00 price target.

Based on the recent corporate insider activity of 48 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of KMX in relation to earlier this year.