CarMax Plunges 6.7% Despite Robust Q3 Results

America’s largest used car retailer CarMax, Inc. (NYSE: KMX) delivered robust third-quarter results, with both revenue and earnings exceeding estimates by a huge margin.

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CarMax’s used car business witnessed significant growth from online offerings due to favorable average selling prices, solid inventory, staffing levels, and global chip shortages, which hampers the production of new automobiles.

Following the news, shares gained more than 2% momentarily, but ended the day down 6.7% at $127.87 on December 22.

Robust Results

KMX reported earnings of $1.63 per share, up 14.8% year-over-year, and 19 cents higher than analysts, estimates of $1.44 per share. The jump in earnings was attributed to a one-time gain of 10 cents from settlement proceeds in a class-action lawsuit.

Furthermore, net revenue grew 64.5% year-over-year to $8.52 billion, significantly outpacing Street estimates of $7.53 billion.

During the quarter, CarMax sold a total of 415,054 autos through its retail and wholesale channels, and registered a 29.3% growth compared to the year-ago period.

Moreover, CarMax bought a total of 383,215 autos from customers, registering a whopping 91% year-over-year growth.

CEO Comments

President, and CEO of CarMax, Bill Nash, said, “Our top-line momentum continued into this quarter and we achieved record levels of third-quarter unit sales in both retail and wholesale, generating all-time record revenues. We also bought more cars from customers than ever before.”

Nash added, “We are excited about the opportunities ahead of us and believe that by delivering the most customer-centric experience in the industry, we will enable sustainable growth and create meaningful long-term shareholder value.”

Analysts’ Take

Recently, J.P. Morgan analyst Rajat Gupta upgraded the stock to a Buy rating from Hold, and maintained the price target of $160 (25.1% upside potential).

Overall, the stock commands a Strong Buy consensus rating based on 7 Buys and 2 Holds. The average CarMax price target of $158.43 implies 23.9% upside potential to current levels. Meanwhile, shares have gained 37.2% over the past year.

Website Traffic

TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into KMX’s performance.

In November, CarMax website traffic recorded a 8.08% year-over-year increase in monthly visits. Similarly, year-to-date website traffic growth increased by 25.03% compared to the same period last year.