CarMax: Better-Than-Feared Quarter Amid Weak Comps and Margin Pressure Supports Neutral Hold Rating

William Blair analyst Sharon Zackfia has maintained their neutral stance on KMX stock, giving a Hold rating yesterday.

Sharon Zackfia has given his Hold rating due to a combination of factors tied to CarMax’s recent performance and profitability trends. While the latest quarterly earnings per share fell sharply year over year, they still exceeded both management’s already-lowered guidance and her own forecast, suggesting results were not as weak as feared. Same-store used vehicle sales declines also landed at the favorable end of the company’s preannounced range and modestly beat broader market expectations, although the negative comps marked the weakest performance since the pandemic distortions and reflected deterioration versus recent periods.

At the same time, key profitability metrics remain under pressure, tempering enthusiasm for the stock. Average gross profit per vehicle contracted again, extending a pattern of year-over-year erosion, and operating expenses expanded significantly as a proportion of gross profit, indicating reduced operating leverage and margin compression. Taken together, these mixed signals—better-than-signaled results in a still-challenged demand environment and ongoing cost and margin headwinds—support a neutral stance, prompting Zackfia to maintain a Hold rather than move to a more decisive positive or negative rating.

In another report released yesterday, Wedbush also maintained a Hold rating on the stock with a $40.00 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.