CarMax Earnings: Stock’s Selloff Too Punitive Though Long-Term Target Timing Withdrawn

Key Morningstar Metrics for CarMax

• Fair Value Estimate: $123
• Morningstar Rating: ★★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of CarMax’s Earnings

CarMax’s KMX stock fell 20% during April 10 trading after fiscal fourth-quarter 2025 EPS missed the LSEG consensus. Citing macro factors, management withdrew timing of retailing and auctioning a combined 2 million units sometime between fiscal 2026-30, but it still expects to reach that volume.

Why it matters: CarMax only updates its long-term goals at fiscal year-end. The withdrawal of a timeline to reach 2 million units, $33 billion of annual revenue, and more than a 5% market share of 0-10-year-old vehicles adds further uncertainty to high market uncertainty around US tariff policy.

• The market generally hates uncertainty, and CarMax reporting on a day the market fell about 2,000 points likely worsened the stock’s April 10 rout. We see CarMax safe from direct tariff exposure other than for parts, but indirect risk is less clear.
• We expect strong store and online traffic to start fiscal 2026 as consumers seek used vehicles as a cheaper alternative to new vehicles. However, higher new vehicle pricing from tariffs will also increase used-vehicle pricing, and it’s unclear how CarMax customers will react.

The bottom line: We are maintaining our fair value estimate but will reassess all modeling inputs once the 10-K is filed. Tariff risk gives us no reason to change our narrow moat rating, and we continue to see the stock as undervalued but best suited for long-term investors at this time.

• The full impact of US tariffs on consumer spending and confidence is not yet clear, but there is recession risk, which would hurt used-vehicle demand. We like that CarMax continues to open more reconditioning centers closer to stores to save logistics costs, plus it’s still taking share.
• We find the stock’s decline too punitive given comparable store unit volume grew 5.1% and EPS only missed consensus by a penny, excluding a lease impairment. Buybacks in the quarter were $98.5 million, and we expect more in fiscal 2026, which we like when the stock is undervalued.