CarMax stock tanks to a YTD low following Q3 report: buy the dip?

CarMax Inc (NYSE: KMX) had a terrible third quarter as inflation and higher interest rates muted a meaningful increase in used cars demand.

CarMax stock down on suspended buybacks

Shares tanked more than 10% this morning to their year-to-date low after the Richmond-headquartered firm also opted to suspend its share buyback programme to cut costs in the midst of a challenging macroeconomic backdrop. Still, CEO Bill Nash said in the earnings press release:

As the market leader, we’ve spent almost thirty years buildings a diversified business that can profitably navigate the ups and downs of the used car industry. We believe we’re well positioned to effectively manage through this cycle.

On the flip side, though, CFRA Research doesn’t seem to share that conviction. Following the earnings print, analyst Garrett Nelson lowered his price target on CarMax stock to $50 that represents another 10% downside from here.

CarMax third-quarter financial highlights

• Net income printed at $37.6 million versus the year-ago $269.4 million
• Per-share earnings also went down significantly from $1.63 to 24 cents
• Sales tanked 23.7% on a year-over-year basis to $6.51 billion
• FactSet consensus was 65 cents a share EPS on $7.16 billion in sales
• Average selling price of $28,530 was up 1.9% versus Q3 of last year

CarMax also said that it’s cutting planned capital expenditures to further lower costs. The weakness in its quarterly report is particularly a bad omen for Carvana that’s already running the risk of bankruptcy as Invezz reported here.