J.P. Morgan analyst Rajat Gupta CFA has maintained their bearish stance on KMX stock, giving a Sell rating on June 16.
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Rajat Gupta CFA has given his Sell rating due to a combination of factors impacting CarMax’s financial performance. Despite the company’s better-than-expected earnings per share and revenue figures, there are underlying concerns that have led to this cautious outlook. The report highlights that while retail and service margins have shown improvement, the CarMax Auto Finance (CAF) segment has experienced a significant increase in net charge-offs year-over-year, indicating potential credit performance issues. Additionally, the company’s selling, general, and administrative expenses were higher than anticipated, primarily due to stock-based compensation, which has affected overall profitability.
Another critical factor contributing to the Sell rating is the economic uncertainty and the potential impact on future loan loss provisions and net charge-offs within the CAF segment. The report also notes that while there was a temporary boost in retail unit sales due to tariff-related pre-buy demand, the sustainability of this trend is uncertain. Furthermore, CarMax has underperformed compared to its peers in recent months, which raises concerns about its competitive position in the market. These elements combined suggest a cautious approach to the stock, leading to the Sell recommendation.
According to TipRanks, Gupta CFA is a 5-star analyst with an average return of 16.3% and a 62.79% success rate. Gupta CFA covers the Consumer Cyclical sector, focusing on stocks such as CarMax, Lithia Motors, and Asbury.
In another report released on June 16, Bank of America Securities also maintained a Sell rating on the stock with a $60.00 price target.