KMX Should I Buy
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CarMax Inc (KMX) is not a good buy at the moment for a beginner investor with a long-term strategy. The company's financial performance is weak, with declining revenue, negative net income, and poor EPS growth. Technical indicators suggest a bearish trend, and the stock has no strong proprietary trading signals. Analysts' ratings and price targets are mixed, with several firms maintaining cautious or underperform ratings. Additionally, there are no recent positive catalysts or significant insider or congressional trading activity to support a bullish case.
The technical indicators for KMX are bearish. The MACD is negatively expanding at -0.517, RSI is neutral at 30.52, and moving averages show a bearish trend (SMA_200 > SMA_20 > SMA_5). The stock is trading near its support level (S1: 38.976), with resistance levels far above the current price, indicating limited upside potential in the short term.
Hedge funds are increasing their holdings, with a 179.34% increase in buying activity over the last quarter. The company reported a slight 0.7% increase in unit sales in Q4 despite declining average selling prices.
CarMax reported a significant Q4 net loss of $121 million due to a goodwill impairment charge. Gross profit fell 9.4% YoY, and the company faces profitability challenges, prompting $200 million in expense cuts. Analysts are cautious about the sustainability of recent improvements, citing rising gas prices, eroding consumer confidence, and intensified competition. The stock has a 70% chance of declining further in the next week.
In Q4 2026, CarMax's revenue dropped by 0.95% YoY to $5.95 billion. Net income fell drastically to -$120.68 million, down 234.29% YoY, with EPS dropping to -$0.85, a 246.55% decline YoY. Gross margin also decreased by 10.66% YoY to 8.97%. The financial performance reflects significant challenges in profitability and growth.
Analyst ratings are mixed to negative. Barclays and JPMorgan maintain Underweight ratings with price targets of $26 and $35, respectively. BofA resumed coverage with an Underperform rating and a $40 price target. While RBC and Evercore raised price targets slightly, they remain cautious about the sustainability of recent trends. The highest price target is $48 from Baird, but this is an outlier.
