CarMax Shares Climb 2.75% Despite 433rd-Ranked 270-Million-Dollar Volume Navigating Earnings Miss and Analyst Downgrades

Market Snapshot

CarMax (KMX) rose 2.75% on November 10, 2025, closing at $31.01, despite a 31.68% decline in trading volume to $0.27 billion, ranking 433rd in market activity. The stock’s performance occurred amid a broader trend of analyst downgrades and reduced price targets, with its price near the 52-week low of $30.26. The company’s quarterly earnings report, released on September 25, revealed a significant miss relative to expectations: earnings per share (EPS) of $0.64 versus $1.03 anticipated, and revenue of $6.59 billion versus $7.07 billion projected. This marked a 6% year-over-year revenue decline and a net margin of 1.98%, underscoring operational challenges.

Key Drivers

Analyst Sentiment and Target Price Adjustments

Multiple brokerages revised their ratings and price targets for CarMax, reflecting a cautious outlook. Royal Bank of Canada reiterated a “Sector Perform” rating, while Morgan Stanley cut its target from $80 to $56 and maintained an “Overweight” rating. Evercore ISI reduced its target from $52 to $35 with an “In-Line” rating, and Truist Financial lowered its target from $47 to $35 while keeping a “Hold.” JPMorgan Chase further downgraded to an “Underweight” rating, slashing its target to $30 from $50. These adjustments collectively signal diminished confidence in CarMax’s near-term prospects, with the MarketBeat consensus price target now at $47.67—a 48% premium to the current price but a significant drop from previous estimates.

Earnings Disappointment and Financial Metrics

The earnings miss highlighted structural issues in CarMax’s business model. Revenue fell 6% year-over-year to $6.59 billion, driven by weaker demand in the used vehicle market and competitive pressures. The company’s net margin of 1.98%—well below the 5% threshold for healthy automotive retailers—indicates margin compression. High leverage, with a debt-to-equity ratio of 2.87, further constrains flexibility during downturns. Analysts have criticized the company’s inability to stabilize earnings, with some noting that CarMax’s reliance on used vehicle sales (83% of revenue) exposes it to inventory cost fluctuations and shifting consumer preferences toward newer models.

Institutional Investor Activity and Market Position

Despite the downgrades, institutional investors have shown mixed engagement. Firms like AQR Capital Management and Norges Bank increased stakes in the second quarter, while others, such as Avior Wealth Management, saw significant position growth. However, these moves appear speculative rather than indicative of long-term confidence. CarMax’s market position as the largest used-vehicle retailer in the U.S. remains intact, but its 3.7% market share of 0-10-year-old vehicles in 2024 underscores the vast untapped potential. Analysts have debated whether the company’s aggressive expansion strategy, including wholesale operations and extended service plans, can offset declining retail margins.

Broader Industry and Economic Pressures

The automotive sector faces headwinds from macroeconomic factors, including high interest rates and stagnant consumer spending. CarMax’s beta of 1.26 suggests it is more volatile than the broader market, amplifying sensitivity to economic downturns. Additionally, the company’s beta of 1.26 and declining price-to-earnings (P/E) ratio of 9.09 indicate undervaluation relative to peers, though this may reflect persistent concerns about profitability. Analysts have emphasized that CarMax’s ability to navigate these challenges will hinge on inventory management, cost controls, and its capacity to adapt to a shifting market toward electric and hybrid vehicles.

Conclusion

The convergence of earnings underperformance, analyst skepticism, and macroeconomic pressures has created a challenging environment for CarMax. While the stock’s 2.75% gain on November 10 suggests short-term optimism, the broader consensus of “Hold” ratings and reduced price targets reflects a wait-and-see approach among investors. The company’s path to recovery will likely depend on its ability to stabilize earnings, reduce leverage, and demonstrate progress in addressing structural inefficiencies. For now, the market appears to price in a prolonged period of adjustment.