CarMax (KMX) Shares Plunge 53% in 2025 Amidst Competitive Pressure
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 12 2026
0mins
Source: NASDAQ.COM
- Market Share Decline: CarMax is losing market share in 2025 to competitor Carvana, which is growing rapidly, leading to the CEO's resignation in December and increasing investor concerns.
- Revenue Drop: In Q3 2025, CarMax reported a 7% year-over-year decline in total revenue to $5.8 billion, indicating a dual drop in sales and profit margins that negatively impacts profitability.
- Increased Competitive Threat: Carvana's 44% increase in units sold last quarter poses a direct threat to CarMax's market position, raising doubts among investors about future profitability.
- Attractive Valuation: Although CarMax's price-to-earnings ratio has fallen to 15, indicating relative undervaluation, investors must cautiously assess its future profitability stability amid declining market share.
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Analyst Views on KMX
Wall Street analysts forecast KMX stock price to fall over the next 12 months. According to Wall Street analysts, the average 1-year price target for KMX is 33.60 USD with a low forecast of 24.00 USD and a high forecast of 37.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
13 Analyst Rating
0 Buy
10 Hold
3 Sell
Hold
Current: 46.960
Low
24.00
Averages
33.60
High
37.00
Current: 46.960
Low
24.00
Averages
33.60
High
37.00
About KMX
CarMax, Inc. is a retailer of used autos. The Company operates through two segments: CarMax Sales Operations and CarMax Auto Finance (CAF). The CarMax Sales Operations segment consists of all aspects of its auto merchandising and service operations. The CarMax Sales Operations segment sells used vehicles, purchases used vehicles from customers and other sources, sells related products and services, and arranges financing options for customers. The CAF segment consists solely of its own finance operation that provides financing for customers buying retail vehicles from the Company. The CAF segment also services all auto loans, it originates and is responsible for providing billing statements, collecting payments, maintaining contact with delinquent customers, and arranging for the repossession of vehicles securing defaulted loans. It provides customers with a range of other related products and services, including extended protection plan (EPP) products and vehicle repair services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Surge in Options Trading Volume for PayPal and Carmax
- PayPal Options Volume: PayPal's options trading volume reached 70,445 contracts, equivalent to approximately 7 million shares, representing about 49.4% of its average daily trading volume of 14.3 million shares over the past month, indicating heightened market interest in its future performance.
- High Put Option Activity: Within PayPal, the $55 strike put option expiring on January 30, 2026, saw 3,180 contracts traded, representing around 318,000 underlying shares, suggesting investor expectations of potential downside risks in its stock price.
- Carmax Options Dynamics: Carmax's options trading volume stood at 17,504 contracts, equivalent to approximately 1.8 million shares, accounting for 48.7% of its average daily trading volume of 3.6 million shares over the past month, reflecting active trading interest among investors.
- Bullish Call Option Surge: For Carmax, the $50 strike call option expiring on March 20, 2026, recorded 16,584 contracts traded, representing about 1.7 million shares, indicating a bullish sentiment in the market regarding its future stock price appreciation.
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Courant Investment Management Exits CarMax (KMX) with $11.11 Million Sale
- Complete Exit: On January 22, Courant Investment Management disclosed in an SEC filing that it sold its entire position of 247,520 shares in CarMax for an estimated $11.11 million, indicating a pessimistic outlook on the company's recovery potential.
- Earnings Decline: CarMax reported a 50% year-over-year drop in third-quarter net earnings to $62 million, with EPS falling from $0.81 to $0.43, reflecting increased pressure on unit volumes and margins across both retail and wholesale channels.
- Poor Market Performance: As of January 21, CarMax shares were priced at $48.75, down 38.7% over the past year, significantly underperforming the S&P 500 by 52.3 percentage points, raising concerns about its future growth prospects.
- Cost Control Measures: Management is targeting at least $150 million in SG&A reductions by fiscal 2027 and repurchased $201.6 million of stock last quarter, demonstrating a commitment to addressing short-term demand pressures, although these measures will take time to impact earnings.
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