CarMax has ripped higher since May, with shares now up 48% for the year versus a 13% climb for the S&P 500. The Virginia-based used-car seller is trying to jump-start growth, and optimism has centered on new chief executive Keith Barr, whom CarMax tapped in February after firing his predecessor in November amid weak sales and a sliding stock.
The next checkpoint comes Tuesday, when investors expect Barr to unpack his four-pillar framework and share what he's seeing from US shoppers. Bloomberg's numbers point to second-quarter profits rising nearly 12% on 6.7% revenue growth from a year ago. Still, the last four reports have frustrated shareholders, with the stock falling after each one, including quarters that cleared profit estimates.
"Beyond the quarter, the bigger debate is whether recent improvement is structural or cyclical," Daniela Haigian of Morgan Stanley said in a note dated Sept. 23. In the Wednesday note, she boosted her price target while keeping an equal weight rating. The week prior, JPMorgan's Rajat Gupta also raised his target and estimates but stayed neutral, saying CarMax is benefiting from "a combination of supporting industry backdrop and company-specific execution" though there are "more proof points needed." Despite the rally, Bloomberg lists 16 of 21 analysts as having hold ratings on the stock.
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Since Barr took the helm, the auto backdrop has gotten tougher. The Federal Reserve raised interest rates, making car payments pricier, fuel costs remain elevated, and consumers are turning more cautious. According to Mark Hackett, the chief strategist at Nationwide Funds Group, CarMax's report may show whether elevated interest rates and costly oil are stressing consumers on the weaker side of the K-shaped economy.
Rivals have not shared CarMax's momentum this year. Carvana is down 23% year to date, AutoNation has slid 19%, Asbury Automotive Group 20%, and Group 1 Automotive 36%. Valuation is also punchy: CarMax's forward P/E sits around 19, more than double its 2025 low, and by that yardstick the stock is a pricier buy than Nvidia.
This week's update should help sort whether this is a lasting reboot or a temporary lift in a tricky cycle. Used-car dealers can benefit when shoppers trade down, but if wallets are squeezed too hard, big purchases get deferred. As Michael O'Rourke at JonesTrading put it: "The earnings calendar is sparse," and "Any management commentary on the consumer is valuable insight in such a fluid environment." Given the premium multiple, mixed post-earnings reactions lately, and a rockier macro setup, whatever CarMax says next will shape how much of this optimism sticks.
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