- MorganStanley Analyst Adam Jonas reiterated an Overweight rating on shares of CarMax Inc KMX and lowered the price target from $90 to $75.
- The enterprise reported a 23.8% decline in revenue in Q3 FY23 Y/Y to $6.5 billion, missing consensus of $7.42 billion.
- Despite the headwinds the used car market is facing, the analyst remains relatively constructive on KMX as earnings revisions have pushed FY23 guidance to less than half of pre-COVID levels.
- Analyst’s revised FY23 EPS forecast is 61% below normalized EPS estimate of $6.50.
- CarMax has consistently generated over $2,000 in GPU, is self-funded, and has one of the strongest balance sheets among retailers.
- Over the long term, the analyst estimates strong growth in same-store sales along with new store openings, allowing KMX to gain operational leverage.
- The analyst also recommends KMX as a “hedge” against the analyst’s more cautious views on the franchise dealership complex and car rental names, which, while also heavily dependent on used car prices, have yet to see the impact on earnings forecasts.
- also read: “It’s only going to get worse” for Carvana, says analyst
- Price promotion: KMX shares traded 4.19% higher at $61.72 on the last check Thursday.
- Photo via company
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