Wednesday, February 8, 2023
HomeMarketCarMax Stock Tumbles on Earnings Miss. Used Cars Are Becoming Less Affordable.

CarMax Stock Tumbles on Earnings Miss. Used Cars Are Becoming Less Affordable.

Carmax missed the third-quarter earnings estimate, following a second-quarter miss.

- Advertisement -


Dreamstime

CarMax
‘s stock fell sharply early Thursday after the used car retailer paused share buybacks and missed estimates for third-quarter profit and revenue.

The company delivered 24 cents per share in earnings for the quarter ending Nov.30. The consensus among analysts tracked by
FactSet
was for 65 cents per share. Revenue of $6.51 billion, down nearly 24% from a year ago, also missed expectations of $7.16 billion.

The stock (ticker: KMX) fell 13.4% to $51.41 in premarket trading Thursday.

 “This is well below investor expectations,” said Stephens analyst Daniel Imbro in a note.

CarMax
said “vehicle affordability challenges” continued to impact its sales given widespread inflationary pressures, climbing interest rates, and low consumer confidence. The company’s CEO William Nash highlighted similar macro concerns when discussing earnings in September and June.

Buyers, especially within the used electric vehicle market, are facing higher prices. Analysis of Cars.com listings data showed that the average asking price for a used Rivian was 132% of new-car pricing. A used Lucid vehicle on average was priced at about 92% of new-car pricing. A search on Carmax’s website pulls out 1,078 options for used electric vehicles.

Consumer affordability and other macro challenges are just one piece of the puzzle. Carmax in the press release also alerted investors that the company has seen some recent loss of market share, although on a year-to-date basis through October it gained share.

Imbro, who has an Equal Weight rating on the stock, said the share losses “raises questions of returns on investment.”

Nash said Carmax is prioritizing initiatives such as reducing costs and unlocking operating efficiencies. Pausing buybacks and cutting planned capital expenditures were also endeavors stated in the press releases.

The company’s second-quarter results had also missed expectations.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com

Credit: marketwatch.com

RELATED ARTICLES
- Advertisment -

Most Popular