CarMax (NYSE:KMX) is scheduled to announce results for the first quarter of Fiscal 2023 (ended May 31, 2023) on June 23 before the market opens. The company’s quarterly performance is likely to be impacted by several headwinds in the used car market, such as low inventory, high-interest rates, and inflation, all of which are affecting demand for used cars.
Furthermore, the decline in average selling prices is expected to keep KMX’s margin at lower levels. Moreover, consumer sentiment remains low due to the fears of an impending recession.
Wall Street’s Fiscal Q1 Expectations
Currently, analysts expect CarMax to post earnings of $0.79 per share in Q1 compared with $1.56 per share reported in the prior-year period. Meanwhile, revenue is expected to decline by about 20% from the year-ago quarter to $7.5 billion.
From a note to investors on June 19, RBC Capital Markets analyst Steven Shemesh believes that the recent securitization pricing and deteriorating credit markets might result in a contraction of CarMax’s Q1 net interest margin more than analysts’ expectations.
Further, Shemesh expects that another 5-10% decline in used car prices would help stabilize the car inventories. In this regard, Shemesh expects the Q1 used vehicle average selling price to be down between 4% and 6%.
On the positive side, the analyst is of the opinion that CarMax is well poised to increase its market share in the used car market in the longer term.
Interestingly, Shemesh reiterated a Buy rating on the stock. However, his price target of $70 implies 10.3% downside potential from the current level.
Technical Analysis on KMX Stock Reflects a Bullish Trend
Ahead of the fiscal Q1 earnings release, most technical indicators indicate that KMX stock is a Buy. According to TipRanks’ easy-to-understand technical analysis tool, the stock’s 50-Day EMA (exponential moving average) is 73.19, while the stock’s price is $78.10, making it a Buy. Further, KMX’s shorter duration EMA (20-day EMA) also signals an uptrend.
Is KMX Stock a Buy, According to Analysts?
Overall, Wall Street analysts are cautiously optimistic about KMX stock. On TipRanks, CarMax has a Moderate Buy consensus rating based on four Buys, five Holds, and one Sell. The average KMX stock price target of $67.22 implies 14.15% downside potential from current levels.
Ending Thoughts
CarMax’s profitability is expected to remain under pressure amid tough business conditions and a decline in consumer spending. Furthermore, easing supply issues in new car production, along with higher rates for used vehicle loans compared to new cars, might negatively impact demand in the used car market.
