CarMax, Inc. (KMX), headquartered in Richmond, Virginia, stands as the largest U.S. retailer of used vehicles and a leading operator of wholesale vehicle auctions. With a market capitalization of $11.7 billion, the company operates through its Sales Operations and Auto Finance segments.

The used vehicle dealer has underperformed the broader market over the past year. Over the past 52 weeks, KMX has surged 17.8%, lagging behind the S&P 500 Index’s ($SPX) 30.1% returns. In 2024, KMX is down marginally, compared to SPX’s 24.1% gains on a YTD basis.

Narrowing the focus, KMX has also fallen short of the Consumer Discretionary Select Sector SPDR Fund’s (XLY) nearly 27.8% returns over the past 52 weeks and 20% gains in 2024.

CarMax shares surged 5% despite missing earnings estimates after its mixed Q2 results released on September 26. Revenue reached $7.01 billion, topping the $6.85 billion consensus but slightly declining year-over-year. A 5.1% increase in retail used vehicle unit sales drove the revenue beat, while $106.1 million in share buybacks and strong gross profit growth likely fueled the stock's rise.

For the current fiscal year, ending in February 2025, analysts expect CarMax’s EPS to decline 1% year over year to $2.99. The company’s earnings surprise history is grim. It surpassed the consensus EPS estimates in only one of the past four quarters while missing the estimates on three other occasions.

Among the 17 analysts covering the KMX stock, the consensus rating is a “Moderate Buy.” That’s based on six “Strong Buy” ratings, three “Moderate Buys,” five “Holds,” one “Moderate Sell,” and two “Strong Sell.”

This configuration is slightly less bullish than two months ago, with seven analysts suggesting a “Strong Buy.”

On Oct. 18, Evercore Inc. (EVR) raised CarMax's price target to $79 from $76, maintaining an “In-Line” rating. The firm highlights CarMax's efforts to enhance its seamless omnichannel experience, positioning it for long-term share gains, margin improvements, and alternative revenue streams. However, near-term concerns about consumer trends, credit conditions, and affordability keep the firm cautious.

KMX’s mean price target of $79.14 represents a premium of 3.2% from current price levels. The Street-high target of $105 indicates a potential upside of 40%.