Should you buy CarMax stock on the post-earnings dip?

CarMax Inc down close to 10% after reporting its earnings for the fourth quarter may be an opportunity to buy, says a Wedbush Securities analyst.

$KMX down as Q4 results miss Street estimates

The used vehicle retailer came in shy of Street estimates for its fiscal Q4 on Thursday.

$KMX also said that it now expects to take until the end of this decade to start selling over 2 million units annually. The New York listed firm had previously expected to hit that goal by 2026.

Still, Seth Basham continued to rate CarMax stock at “outperform”. He even raised his price objective on it to $100 in a recent note which suggests about a 40% upside from here.

Note that the $12 billion company currently does not pay a dividend yield.

Why is Basham bullish on CarMax stock?

Seth Basham is bullish on $KMX because he expects normalising CAF metrics to deliver earnings upside in the coming months through 2026.

SG&A leverage as well as sustained GPU levels, he added, will likely be a positive catalyst for the retail stock as well.

The Wedbush analyst remains convinced the Richmond-headquartered firm will note positive unit growth this year as the macro backdrop continues to improve. Other reasons he cited for the constructive view on CarMax stock include more lenient credit conditions and better affordability.

Basham recommends investing in CarMax Inc even though it does not currently pay a dividend yield. Analysts at RBC Capital reiterated their “outperform” rating on $KMX this week as well.