CarMax Hits Speed Bump: Shares Drop 13% Amid Delayed Targets

CarMax ( KMX ), the pre-owned vehicle giant, faces a bumpy road ahead as it misses analyst expectations for its fourth-quarter results and pushes back its long-term financial targets. The company's shares took a nosedive, plunging as much as 13% in premarket trading.

Blaming ongoing vehicle affordability challenges and inflationary pressures, CarMax ( KMX ) now expects to reach its target of selling over 2 million combined retail and wholesale units annually between 2026 and 2030, a delay from its previous goal of achieving this milestone by 2026.

The ripple effect of CarMax's disappointing performance extended to other auto retailers like Carvana and AutoNation, which also saw declines in premarket trading.

Analysts express concern over the company's future prospects, with Truist Securities' Scot Ciccarelli cautioning that the recovery may not be as robust as anticipated. CFRA Research's Garrett Nelson highlights the impact of "higher-for-longer" interest rates on car sales volumes, exacerbated by inventory overhang on pricing.

The pandemic-induced surge in vehicle inventories has led to fierce competition among pre-owned retailers, driving down prices and squeezing profit margins. CarMax ( KMX ), like its counterparts, now faces the challenge of balancing inventory levels and navigating the turbulent waters of inflation.

With CarMax ( KMX ) warning of further profit-sharing revenue hits due to inflationary pressures, investors brace for continued turbulence in the used-car market. As the industry grapples with evolving dynamics, CarMax's ability to steer through these challenges will be closely watched by investors and industry observers alike."

Technical Outlook
CarMax ( KMX ) stock is trading within the overbought region with a Relative Strength Index (RSI) of 27.23. The stock is trading below the respective Moving Averages further validating to the Bearish thesis.