CarMax Stock Crashes to 52-Week Low After Shocking Earnings Miss – What Investors Need to Know

CarMax (KMX) Stock and Market Position as of September 25, 2025

• Big Stock Drop: CarMax (NYSE: KMX) shares plunged in double digits on September 25, 2025, after a disappointing earnings report – falling nearly 13% in pre-market trading ^[1] and even breaching a new 52-week low (down over 20% at one point in early trade) ^[2]. This wiped out much of the stock’s recent value and brought year-to-date losses to roughly 30%+, versus a double-digit gain for the S&P 500 ^[3].
• Weak Q2 Earnings: The used-car retailer’s fiscal Q2 results (quarter ended August 31, 2025) badly missed expectations. Net profit fell to $95.4 million (EPS $0.64), down from $133 million (EPS $0.85) a year ago ^[4]. Earnings per share came in far below Wall Street’s $1.03 consensus estimate ^[5]. Revenue dropped about 6% year-over-year to $6.59 billion, also missing the ~$7.0 billion expected ^[6].
• Slumping Sales Volumes:Retail used vehicle sales fell 5.4% (to ~199,700 units in Q2) as comparable-store sales dropped 6.3% ^{[7] [8]}. Wholesale unit sales also slipped 2.2% ^[9]. Weaker demand for used cars – even at lower prices – hurt CarMax’s top line. Total used vehicle revenues declined ~7% in the quarter ^[10].
• Market Headwinds: CarMax cited “waning demand for used vehicles” amid soft consumer demand, elevated interest rates, and tariff-related headwinds ^[11]. Higher borrowing costs have made auto loans more expensive, discouraging some buyers. The company is also facing rising reconditioning (repair/clean-up) costs per vehicle ^[12]. Notably, buyers had pulled forward purchases in the prior quarter ahead of new import tariffs, leading to a surprise drop in sales this quarter ^[13].
• Financial Pressure & Margins: CarMax’s profitability is under pressure. Net profit margin for the quarter was only ~2% ^[14]. Income from CarMax’s financing arm dropped 11% to $102.6 million as credit losses mounted ^[15]. The company had to boost provisions for loan losses due to worsening performance of 2022–2023 auto loan vintages ^[16], reflecting credit stress in its customer base.
• Cost Cuts and Strategy: In response to the challenging environment, CarMax announced plans to cut at least $150 million in selling, general & administrative (SG&A) costs over the next 18 months ^[17]. Some savings are expected in fiscal 2026, with most by fiscal 2027. The company is also continuing share buybacks (it repurchased $180 million in stock during Q2) ^[18] and launched a new marketing campaign (“Wanna Drive?”) to highlight its online/offline buying experience ^[19].
• Competitive Landscape: CarMax faces intense competition from both traditional dealerships and online upstarts. Carvana (CVNA) – a purely online used-car seller – has been aggressively pricing and recovering market share (Evercore ISI warns Carvana’s resurgence is a key risk for CarMax) ^[20]. AutoNation (AN) and other dealership groups also compete heavily in used-car sales; AutoNation noted this summer that automakers are keeping new car prices competitive, which can pressure used car demand ^[21]. Notably, CarMax’s weak results dragged down peers’ stocks as well – Carvana and AutoNation shares also traded lower in sympathy ^[22].
• Analyst Sentiment & Targets: Prior to the earnings miss, Wall Street’s view on KMX was cautiously optimistic. The stock carried a “Moderate Buy” consensus rating with 1 Strong Buy, 8 Buy, 4 Hold, and 1 Sell recommendations ^[23]. The average 12-month price target was around $80–$82 per share ^[24] – indicating bullish upside from the ~$57 pre-drop price. Top analysts had targets ranging from the low-$60s up to the $90s ^{[25] [26]}. However, the Q2 earnings miss is prompting reassessment: Wedbush swiftly downgraded CarMax to “Neutral” from Outperform on the news ^[27], and others may cut forecasts.
• Used-Car Market & Economy Context: CarMax’s struggles come amid a cooling used-car market in 2025. After record-high used vehicle prices in 2021–22, prices have begun to ease as supply chains normalize and new car inventory improves. As of September 2025, average U.S. used car listing prices are trending down (around $25.5k) entering the autumn ^[28]. At the same time, auto loan interest rates remain elevated – the average used-car APR was ~11–12% in early 2025 ^[29] – which squeezes consumers’ budgets. High inflation and economic uncertainty have made car buyers more price-sensitive, contributing to weaker demand for big-ticket items like vehicles.

Stock Performance Recap (Late September 2025)

CarMax’s stock had been underperforming even before the latest plunge. Heading into late September, KMX shares were already down roughly 30% year-to-date, dramatically lagging the S&P 500’s ~+13% gain ^[30]. In the week leading up to the earnings, the stock drifted in the mid-$50s per share, reflecting cautious sentiment. On September 25, 2025, however, CarMax’s stock cratered on heavy volume after the earnings release. In pre-market trading that morning, KMX fell about 12–13% immediately as the disappointing numbers hit the wires ^[31]. Once the market opened, the sell-off intensified – at one point the stock was down over 20% intraday, hitting fresh 52-week lows ^[32].

This steep drop pushed CarMax well below its previous low of ~$54.5 and into new territory for the year. By mid-day, shares traded around the low-$50s, though volatility remained high. (For context, CarMax’s 52-week high was about $91 ^[33], reached during stronger market conditions.) Investors essentially erased over a fifth of CarMax’s market value overnight, reflecting shock at how far earnings and sales had fallen short. The company’s market capitalization shrank to roughly $8–9 billion after the plunge ^[34].

Notably, the broader market was also slightly down on Sept 25, but CarMax was by far one of the worst performers of the day. It was the biggest decliner in the S&P 500 that morning, tumbling ~13% in pre-market and remaining sharply negative thereafter ^[35]. The news created a ripple effect in the auto retail sector: Carvana and AutoNation stocks fell in sympathy, as CarMax’s results signaled potential industry-wide softness ^[36]. Overall, the past week’s trend for KMX went from uneventful to brutal – a relatively flat performance turned into a sudden crash following the earnings release. Traders will be watching if the stock stabilizes around these lows or continues to slide in the coming days.

Second-Quarter Earnings Highlights (Fiscal Q2 FY2026)

CarMax’s fiscal second quarter 2026 (covering June–August 2025) proved challenging on all fronts. The company’s earnings report, released the morning of Sept 25, revealed significant declines in profit and sales:

• Revenue: Total revenue was $6.59 billion, down ~6% from $7.01 billion in the same quarter last year ^{[37] [38]}. This was well below analyst expectations (Wall Street was looking for roughly $7.0–$7.1 billion) ^{[39] [40]}. The shortfall suggests CarMax sold fewer cars and potentially at slightly lower prices, given industry price trends. Indeed, retail used vehicle revenue dropped 7.2% year-on-year to $5.27 billion ^[41].
• Earnings: Net income came in at $95.4 million, or $0.64 per diluted share ^[42]. This marks a ~28% drop from $133 million ($0.85 per share) a year earlier ^[43]. It also badly missed the consensus forecast of about $1.03 per share ^[44]. The earnings miss of nearly 40 cents was a big negative surprise – especially since CarMax had beat expectations in the prior quarter (Q1) ^[45]. The deterioration this quarter indicates the company’s profitability has been squeezed by lower sales and higher costs.
• Comparable Sales & Units: CarMax’s retail unit sales volume was 199,729 used cars, down 5.4% year-over-year ^[46]. On a comparable store basis (stores open at least a year), used unit sales fell 6.3% ^{[47] [48]} – a notable decline for a company that, until recently, was still finding ways to grow sales. Wholesale vehicle sales (cars CarMax sells at auction) fell 2.2% in unit volume ^[49], a more modest drop. The company reported that it bought ~293,000 vehicles from consumers and dealers during Q2 (slightly fewer than last year), indicating sourcing of used inventory has also slowed by about 2.4% ^[50].
• Profit Margins: Despite lower sales, gross profit per used vehicle remained steady at $2,216 per unit, roughly flat with last year ^{[51] [52]}. Wholesale gross profit per unit was about $993, also in line with a year ago ^[53]. This suggests CarMax did not deeply discount vehicles; the pressure came more from volume declines than margin per car. Total gross profit for the quarter was $717.7 million, down 5.6% ^[54]. However, operating expenses didn’t fall as much, leading to an operating margin squeeze – SG&A costs were 83.8% of gross profit vs ~80% last year ^[55], reflecting lower operating leverage.
• CarMax Auto Finance (CAF): CarMax’s financing division saw income drop 11.2% to $102.6 million ^[56]. The culprit was a spike in provisions for loan losses amid credit deterioration. The provision for loan losses jumped to ~$142 million (from ~$113M a year prior), as CarMax had to account for higher expected defaults on auto loans from cohorts in 2022 and 2023 ^[57]. Essentially, more customers are falling behind on car payments, which the company attributes to “worsening performance” in those loan vintages ^[58]. On the positive side, CarMax’s net interest margin in CAF did improve (likely due to higher interest rates charged on loans), but it wasn’t enough to offset the credit costs ^[59].
• Cash Flow and Buybacks: Despite the earnings miss, CarMax continued returning cash to shareholders. It repurchased $180 million of stock in Q2 ^[60], part of an accelerated buyback program this year. While this signals confidence from management, it also uses cash during a period of tighter profit – something to monitor if profits stay weak. The company did not pay a dividend (CarMax historically has not paid dividends, focusing on buybacks instead).

Overall, the Q2 report depicts a company caught between softening consumer demand and rising costs. Both retail and wholesale segments showed weakness. The magnitude of the earnings miss (EPS nearly 40% below estimates) suggests that either market conditions deteriorated faster than CarMax and analysts anticipated, or that CarMax’s execution faltered in adjusting to the environment. Management characterized it as a “challenging quarter” but expressed confidence in the long-term strategy and CarMax’s business model ^[61]. CEO Bill Nash noted that despite short-term headwinds, the company remains committed to its omni-channel sales approach and growth plans ^[62].

Key Drivers: Used Car Market Slowdown and Economic Factors

Several broader factors have converged to create a tough climate for CarMax and its industry in 2025:

• High Interest Rates: The U.S. Federal Reserve’s series of rate hikes (to combat inflation) has significantly raised the cost of auto loans. By early 2025, the average interest rate on a used-car loan was around 11–12% ^[63], roughly double what it was a couple of years ago. These elevated financing costs directly hit affordability for buyers – especially the subprime and near-prime consumers who often shop used cars. Even as the Fed began cutting rates slightly by September 2025 (easing from peak levels) ^{[64] [65]}, borrowing costs remain historically high. CarMax itself noted “elevated interest rates” as a reason consumer demand is soft ^[66]. When monthly payments for a used car jump by $50-$100 due to interest, many potential buyers delay purchases or trade down to cheaper vehicles.
• Used Car Price Trends: During 2021–2022, used vehicle prices surged to record highs amid new car shortages (chip shortage) and stimulus-fueled demand. In 2023–2024, that trend leveled off. Now in 2025, used car prices have started to gradually come down toward normalcy. Industry data shows that both retail and wholesale used-car values have softened entering late 2025 ^[67]. For example, CarMax reported the average wholesale selling price ticked down ~1.6% in Q2 (though retail prices per unit sold weren’t explicitly given, they likely saw some decline too) ^{[68] [69]}. CarMax’s unit volumes fell despite slightly lower prices, indicating demand elasticity – even cheaper prices haven’t fully enticed buyers in the current climate. The company acknowledged “waning demand” for used vehicles ^[70]. Inflation-weary consumers are prioritizing essentials, and a car purchase (especially used) can often be postponed. The fact that CarMax had to cut volumes while maintaining margins per car implies it chose not to slash prices too deeply, which in turn hurt sales count.
• Tariff and Supply Dynamics: Another unique factor cited was a “tariff-fueled pull-forward effect.” According to Bloomberg reports, buyers rushed to purchase vehicles in Q1 (ahead of an import tariff implementation on foreign cars) which hurt CarMax’s Q2 comparable sales as that demand had been pulled forward ^[71]. In other words, some sales that might have occurred in the June–Aug quarter were instead made earlier to avoid potential price hikes from tariffs. Additionally, the supply of both new and used cars has been improving post-pandemic: New car production is up, and rental car companies are finally selling more used inventory again. Better new-car availability (with automakers offering deals on some models) means consumers have alternatives to buying expensive late-model used cars. AutoNation noted that automakers were “maintaining competitive pricing on flagship models” in the new car market ^[72] – this puts pressure on used-car sellers like CarMax to either cut prices or lose volume. CarMax’s wholesale purchase volumes being down ~2% indicates it’s also buying fewer cars, possibly to avoid overstock if demand is weakening ^[73].
• Consumer Confidence & Macroeconomy: The period has seen mixed economic signals. Unemployment remains relatively low, but consumer confidence has been shaky due to inflation and recession fears. Big-ticket purchases like automobiles often get deferred if people worry about the economy. CarMax’s core customer base (used-car buyers including many younger or credit-challenged consumers) may be feeling the pinch of high inflation on essentials and thus delaying car upgrades. Moreover, with gasoline prices and other living costs fluctuating, there’s an element of caution. Some relief is that gas prices in 2025 are lower than the 2022 peaks, and the job market is still solid – factors that normally support car sales. But clearly in CarMax’s case, the negatives (rates, prices, and perhaps the unwinding of the pandemic used-car boom) outweighed these positives this quarter.

Looking forward, the used-car market is expected to remain in flux. Industry analysts (e.g., Cox Automotive) forecast used-vehicle prices to continue a modest decline into 2026, which could actually help volume if financing becomes more accessible ^{[74] [75]}. A key watchpoint is the Fed’s policy: if interest rates start coming down meaningfully in 2026, used car dealers like CarMax might see demand pick back up as auto loans get a bit cheaper ^[76]. For now, CarMax is navigating a tightrope of managing inventory, pricing, and expenses until the macroeconomic picture improves.

Competitive Landscape: CarMax vs. AutoNation vs. Carvana

CarMax is the largest used-car focused retailer in the U.S., but it doesn’t operate in a vacuum. Its performance and outlook are closely tied to what competitors are doing and how the overall automotive retail space is evolving:

• CarMax’s Niche & Model: Founded in the 1990s, CarMax pioneered the “no-haggle” used car superstore concept, offering a huge selection and fixed pricing. It now has over 230 stores plus a substantial online presence. Unlike franchised dealers, CarMax doesn’t sell new cars (only used) and doesn’t have manufacturer ties. Its value proposition is large inventory, certified quality cars, and a consumer-friendly buying process. In recent years CarMax invested heavily in omni-channel capabilities – allowing customers to buy a car fully online, in-store, or a mix. This paid off during the pandemic and beyond: in Q2, CarMax noted 80% of retail sales had an online component, and 12% of customers bought purely online ^[77]. The new “Wanna Drive?” ad campaign highlights this flexibility ^[78]. However, a challenge for CarMax is that its operational costs (reconditioning centers, sales staff, physical lots, etc.) are high, and when sales drop, it can’t pivot as easily as an online-only player.
• Carvana:Carvana (CVNA) is the disruptive upstart in the used-car space. It’s an e-commerce-driven platform known for its car “vending machines” and fully online purchase process. Carvana grew explosively from 2017–2021, but overextended itself and encountered financial troubles in 2022 (even flirting with bankruptcy due to heavy debt). In 2023–2024, Carvana underwent restructuring and cost cuts, and by 2025 it saw a resurgence in investor optimism – remarkably, Carvana’s stock had rallied in 2025 (up over 80% YTD) as the company stabilized operations ^[79]. By late 2025 Carvana still has smaller sales volume than CarMax, but it’s closing the gap: CarMax sold ~338k vehicles (retail + wholesale) in Q2 ^[80], whereas Carvana sold around 76k retail units in its Q2 (an estimate, as Carvana’s reported numbers earlier in 2025). One Evercore analyst pointed out Carvana’s aggressive tactics and tech-driven approach present a “key risk” to CarMax ^[81]. Essentially, Carvana has been willing to undercut on price to boost sales and has a more digital-native customer experience, which appeals to younger buyers. In this quarter, Carvana’s shadow loomed large – if CarMax customers are defecting to Carvana for convenience or better pricing, that pressures CarMax’s growth. It’s telling that on Sept 25, Carvana’s stock also fell (~5-6%) in early trading after CarMax’s miss (investors possibly extrapolating the demand weakness to Carvana) ^[82]. Over the long run, CarMax is responding by enhancing its online offering and leveraging its nationwide physical footprint for test drives and service – a hybrid model Carvana can’t easily replicate. The question is whether CarMax can keep its costs in check to compete on price while Carvana (still unprofitable as of 2025) chases growth.
• AutoNation and Traditional Dealers:AutoNation (AN) is the largest U.S. auto dealership chain, primarily known for new car sales (it sells vehicles from various manufacturers through franchises) but also a major used-car retailer. Unlike CarMax, AutoNation can source used inventory from trade-ins on new cars and has service/parts businesses that provide diversified income. AutoNation’s latest earnings (Q2 2025) actually showed increases in used-vehicle gross profit and unit sales ^[83] – they managed a 6% rise in used units, partly by leveraging their extensive dealer network and sourcing. AutoNation’s CEO in July highlighted that new car pricing remains high, which usually bodes well for used sales, but also noted automakers are selectively offering deals on certain models ^[84]. AutoNation and peers (Lithia, Penske, etc.) are also expanding standalone used-car centers and online sales. CarMax competes with them on both local and national levels. One advantage CarMax has is scale in used cars only – it’s laser-focused on that market, whereas dealers split focus with new cars. But dealers have an edge in that they can certify pre-owned cars from their partnered brands and sometimes offer lower financing rates via manufacturer lending arms. On Sept 25, AutoNation’s stock dipped a few percent, likely because if CarMax is struggling, it hints that industry-wide used car demand is soft, which could hit dealers’ used operations too ^[85]. Another point: franchise dealers benefited from high new car prices and low new inventory in 2021-2022, making record profits (including on used cars). As new car supply improves in 2025, their windfall is normalizing. This means tougher competition for used-car-only sellers like CarMax, since dealers are now very eager to win used car business to offset slimmer new car margins.
• Smaller Competitors & Online Platforms: Aside from Carvana, CarMax also contends with other online-focused platforms (e.g. Vroom, Shift) which had their own struggles, and with peer-to-peer marketplaces (Facebook Marketplace, etc.). While those haven’t dethroned the big players, they do fragment the market. CarMax’s sheer scale (it’s the #1 used vehicle retailer in the U.S. by volume) gives it purchasing power and brand recognition. The company’s wholesale auction business also gives it an outlet for cars it doesn’t retail. That said, in a commodity-like market (a used 2018 Toyota Camry is the same car whether at CarMax or elsewhere), pricing and convenience drive the competition. In 2025, consumers are savvier – many get online quotes from CarMax, Carvana, dealers, etc., and go with the best deal. This dynamic is squeezing CarMax’s growth and was evident in the quarter’s volume decline.

In summary, CarMax is sandwiched between upstart online rivals on one side and traditional dealer groups on the other. Each competitor has different strengths: Carvana with tech and a risk-taking approach, AutoNation with diversified revenue and OEM relationships. CarMax’s challenge (and opportunity) is to leverage what it does best – a trusted brand for used-car quality and a seamless omni-channel process – while cutting costs to stay price-competitive. The next few quarters will reveal if CarMax can regain sales momentum (perhaps if competitors also pull back) or if it continues to lose share in a tough market.

Financial Health and Valuation

Despite the recent setbacks, CarMax’s overall financial position provides some stability – but investors have growing concerns about its leverage and profitability trends:

• Balance Sheet & Debt: CarMax carries a significant debt load, primarily to finance its large inventory and its auto loan portfolio. The company’s debt-to-equity ratio is about 2.86 ^[86], which is relatively high. This reflects the fact that CarMax uses debt facilities and asset-backed financing (securitizations) to fund the used cars on its lots and the loans it makes to customers. While this is normal for auto retail (which is asset-intensive), it means CarMax is more sensitive to interest rate changes – higher rates increase its financing costs on debt. The positive is that CarMax’s liquidity appears solid: it has a current ratio around 2.4 (current assets double current liabilities) and a quick ratio (more strict measure) around 0.8 ^[87]. The healthy current ratio suggests CarMax has enough working capital (cash, receivables, inventory) to cover short-term obligations. Additionally, CarMax has continued access to credit markets – for example, it completed a $400M+ “non-prime” auto loan securitization in late September to offload some of its finance receivables and free up capital ^[88]. As long as used car values don’t plummet suddenly, CarMax’s inventory and loan collateral should support its debt. However, the rise in loan losses is a red flag – if credit defaults keep climbing, lenders may demand higher rates or tighter terms from CarMax’s finance arm.
• Profitability & Margins: CarMax’s recent net profit margin of ~2% ^[89] is thin. Its operating margin in Q2 was compressed by the revenue decline. For the full fiscal year, analysts now project CarMax will earn around $3.20–$3.30 EPS (down from near $3.90 forecasts pre-earnings) ^[90]. That would still be profitable, but significantly below the company’s peak earnings a couple years ago. Gross margins per vehicle have held steady, which is a testament to CarMax’s pricing discipline – it hasn’t engaged in a price war (yet). The risk, however, is that to re-accelerate sales, CarMax might need to lower prices or increase promotions, which could further pinch margins. On the expense side, CarMax is taking action: the announced $150 million SG&A cost reduction plan (over 18 months) should help efficiency ^[91]. This is roughly 5-6% of its annual SG&A expense (which was about $601 million just in Q2) ^[92]. If they achieve these cuts, it could boost earnings in future quarters – essentially a partial offset if gross profit is under pressure. Investors will be watching execution here: past cost initiatives in retail sometimes lag or face implementation costs.
• Valuation Metrics: After the stock plunge, CarMax’s valuation multiples have compressed. At around ~$50–55 per share, KMX trades at roughly 15–16 times trailing earnings ^[93]. Forward P/E (based on those ~$3.2 EPS estimates for FY2026) is in the mid-teens as well, perhaps around ~15x. This is below the broader market average and somewhat below CarMax’s historical P/E range. For comparison, during stronger growth years CarMax often traded near 20x earnings. The lower multiple reflects the uncertain outlook and lack of growth this year. In terms of other metrics: CarMax’s price-to-sales ratio is around 0.4 (because annual revenue is about $28 billion), indicating a lot of revenue per share price, but low margins. Its EV/EBITDA ratio is also modest. Peer valuations vary – AutoNation, for example, trades at an even lower P/E (~10x), but Carvana’s valuation is harder to gauge due to negative earnings (investors value it on sales growth potential instead, and it has been very volatile). If CarMax can weather the storm and get back to earnings growth, the stock might look like a bargain at these levels; however, if earnings disappoint further, even a 15x multiple could prove expensive. The average analyst price target of ~$80 (before the report) implied a forward P/E closer to 25x – that optimism will likely be reined in now ^[94]. It’s worth noting CarMax’s book value is much lower than its market cap (due to financing assets and goodwill), so traditional book multiples aren’t very meaningful here.
• Cash Flow: CarMax historically generates cash from its retail operations but consumes cash in growing its auto finance portfolio and inventory. In the first half of this fiscal year, operating cash flow has been impacted by lower net income and possibly by needing to finance more inventory as used car prices fluctuated. The company’s decision to keep buying back shares in Q2 (using $180M) suggests they still had adequate free cash or borrowing capacity ^[95]. However, if the business remains under pressure, CarMax might slow share repurchases to conserve cash. It has already paused guidance (CarMax did not provide formal forward guidance this quarter, likely due to uncertainty). Maintaining a balance between supporting the stock (via buybacks) and investing in the business (technology, stores) will be key.

In summary, CarMax’s financial health is stable but stretched: high leverage and slim margins leave less room for error in a tough market. The forthcoming cost cuts and any improvement in the macro environment (e.g. lower interest rates) will be critical to shore up its finances. For now, the stock’s valuation reflects a cautious view – investors are essentially taking a “wait-and-see” approach on a potential recovery.

Analyst Commentary and Outlook

Leading up to this earnings release, many Wall Street analysts were moderately bullish on CarMax – albeit acknowledging headwinds. In light of the new results, there’s been a swift shift in tone:

• Pre-Earnings Consensus: CarMax had a “Moderate Buy” consensus rating. Out of 14 main analysts tracked, 1 was at Strong Buy, 8 Buys, 4 Holds, and 1 Sell ^[96]. The average 12-month price target was about $81.50 per share ^[97], which was ~40% above the pre-earnings trading price (mid-$50s). This bullish target underscored that analysts expected a rebound in performance. For instance, Wedbush, Stephens, and others had targets in the $80s while maintaining positive ratings ^{[98] [99]}. Even more conservative firms like JPMorgan had targets in the mid-$60s (JPM raised its target from $58 to $65 just a week before earnings) ^[100]. Analysts were basically saying: “Yes, it’s been a rough year for CarMax, but we see things improving ahead.”
• Post-Earnings Revisions: The magnitude of the Q2 miss is causing quick reassessments. Wedbush downgraded CarMax to “Neutral” (from Outperform) on Sept 25 after the earnings came out ^[101]. In its note, Wedbush highlighted the earnings miss and likely cut its target price (not yet disclosed in the snippet, but downgrades often come with target cuts). Evercore ISI, which had an $80 target, may also revisit its model – notably, Evercore had expected CarMax to return to positive same-store sales growth by next quarter but warned that any “delay in execution could stall the recovery” ^[102]. That warning seems prescient now. We could see some analysts move to Hold or Reduce until there’s evidence of a turnaround. On the flip side, a few analysts might view the sell-off as an overreaction and stick to bullish calls – for example, firms like Needham (which had one of the highest targets at $92) and Benchmark (Buy, $75 target) might argue CarMax’s fundamentals will bounce back ^[103]. It will be telling to watch how the consensus target shifts in coming weeks; it’s likely to come down from $80+ closer to, say, $70 or lower, given the uncertainty.
• Valuation Opinions: Before earnings, some analysts pointed out that CarMax’s valuation had gotten attractive. For instance, Zacks maintained a Hold but noted the stock’s weakness had it trading in line with the market and that a lot depended on earnings outlook revisions ^{[104] [105]}. Now that earnings were weaker, those outlooks will indeed be revised downward. A key metric analysts watch is earnings estimate revisions – and we can expect 2025 and 2026 EPS estimates for CarMax to be cut across the board. As of mid-September, consensus EPS for next quarter (fiscal Q3) was around $0.82 and for the full year around $3.89 ^[106]. These will likely drop (perhaps Q3 consensus moves to ~$0.70s and full-year to ~$3.20-3.50 range). If so, some analysts may still say the stock, at ~$50, is cheap at ~15x forward earnings if those earnings can be achieved.
• Growth Drivers & Concerns: In research notes, bulls and bears are divided on a few key points:
  • Bulls argue that CarMax is a best-in-class operator that will benefit once the used car cycle turns positive. They cite CarMax’s strong brand, its profitable history (rare among used car disruptors), and improvements like omni-channel sales. They also note CarMax is gaining market share in appraisal/buying vehicles from consumers (often the first step to a sale). For instance, analysts at Stephens recently reiterated Overweight with $81 target, expressing confidence in CarMax’s long-term strategy ^[107].
  • Bears/Hold-outs focus on near-term pain: weakening consumer demand, rising credit losses, and competition. They worry CarMax might be structurally squeezed by online competitors on one side and lower-margin business on the other. The Sell rating out there (from a less prominent firm) presumably believes CarMax’s earnings will not recover soon and the stock could fall further.
  • A specific concern is CarMax’s Auto Finance exposure. With loan delinquencies rising nationally (especially in subprime auto loans in 2025), some analysts fear CarMax could either tighten lending (which hurts sales) or face more write-offs. The company’s move to securitize more of its loans (as noted by the $non-prime securitization on Sept 24) is one way to mitigate risk, but it doesn’t remove it entirely. We might see analysts ask on the conference call or in reports: How high will CarMax’s loan loss provisions go if used car values decline?
• Macro and 2026 Outlook: Many analysts tie CarMax’s fate to macro factors. If interest rates start falling in 2026, that is a potential catalyst for a rebound in CarMax’s sales (cheaper financing). Also, if the U.S. economy avoids a deep recession and consumer confidence improves, demand for used cars could pick up as people who delayed purchases come back into the market. Some analysts are likely to say the long-term thesis for CarMax remains intact – Americans will continue to buy tens of millions of used cars each year, and CarMax’s share of that huge market (still under 5%) can grow. On the other hand, the short-term is unpredictable: used car pricing dynamics and the possibility of a mild recession in 2025/26 could mean a bumpy ride. For now, most experts appear to be temporarily cautious on KMX stock, awaiting clearer signs of stabilization.

In terms of concrete price targets updates, we’ll likely see new targets come out in the days following Sept 25. It wouldn’t be surprising to see some targets cut into the $60s or even high $50s (essentially near the trading price) from those who were at $80+. Conversely, a few optimists might argue the sell-off is overdone, and maintain targets, saying the stock could rebound if CarMax even modestly beats the now-reduced expectations next quarter.

Bottom line from the analyst community: CarMax is still viewed as a fundamentally important player in a tough industry, but its valuation and rating are under review given the extent of this earnings miss. Investors should expect more volatile trading and a lot of “wait-and-see” language from analysts until CarMax proves it can navigate the current used-car downturn or until external conditions improve.

Conclusion

CarMax’s September 25 stock plunge and underwhelming earnings underscore the stiff challenges facing both the company and the broader used-car industry right now. A confluence of factors – from high interest rates squeezing buyers, to normalizing used-car prices, to aggressive competitors – have put CarMax in a tough spot. The company is responding with cost cuts, marketing efforts, and a focus on its long-term strengths (like its omni-channel platform), but the near-term outlook is cautious.

For investors, CarMax presents a mixed picture as of late 2025: fundamentally, it’s a market leader with a proven model, but cyclical and competitive pressures are weighing on results. The stock’s dive to a 52-week low reflects a crisis of confidence in the immediate trajectory. Yet, if the company can stabilize sales or if macro conditions ease (lower rates, improving consumer demand), there is room for a rebound given how far expectations have fallen.

As of now, the prudent stance – echoed by several analysts – is to remain on the sidelines (or “Neutral”) until clearer signs of a turnaround emerge ^[108]. Long-term oriented investors will be watching CarMax’s execution on cost savings and its ability to leverage its strengths to regain momentum. Meanwhile, the next few weeks will likely bring more analysis and possibly volatility as the market digests the latest news and any updates from management.

CarMax has navigated industry cycles before, but this is a particularly rough patch. The coming quarters (and the all-important spring tax refund season of early 2026) will be crucial in determining whether CarMax can drive its performance back up or if further detours lie ahead. For now, the stock’s skid serves as a stark reminder of how quickly market sentiment can shift when earnings disappoint and of the importance of macro trends in the auto retail business.

Sources: Relevant information was compiled from a range of financial news and data outlets, including Reuters ^{[109] [110]}, Yahoo Finance/Benzinga ^{[111] [112]}, Reuters (Evercore and AutoNation commentary) ^[113], MarketBeat (analyst ratings) ^[114], Investing.com ^{[115] [116]}, and CarMax’s official earnings release ^{[117] [118]}. These sources provide a comprehensive view of CarMax’s recent performance, industry context, and expert outlook as of September 25, 2025.

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