Maintaining Hold on CarMax Amid Strategic Transition, Leadership Uncertainty, and Turnaround Risk

Benchmark Co. analyst Michael Albanese has maintained their neutral stance on KMX stock, giving a Hold rating yesterday.

Michael Albanese has given his Hold rating due to a combination of factors tied to both recent performance and strategic uncertainty. CarMax’s latest quarter slightly surpassed revised expectations, but only after management had already lowered guidance, and the underlying trends in volumes, margins, and depreciation still point to pressured profitability. The company is embarking on a significant strategic shift—cutting prices, boosting marketing, and revamping digital tools—to reignite unit growth, yet these moves are likely to weigh on near-term earnings while their effectiveness is still unproven.

At the same time, the absence of a permanent CEO and ongoing operational headwinds, including soft demand, higher marketing spend, and elevated depreciation, reduce visibility and heighten execution risk. Management’s cost-cutting plans and focus on better sourcing, analytics, and ancillary profit streams represent potential upside, but they are still in early stages and need to demonstrate tangible results. Although the stock now trades near the low end of its historical valuation range and could eventually present an attractive value opportunity, the combination of turnaround risk, leadership transition, and uncertain KPIs leads Albanese to maintain a neutral, Hold stance rather than recommend buying or selling the shares at this time.

In another report released yesterday, Morgan Stanley also maintained a Hold rating on the stock with a $35.00 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.