- Price
- $52.62
- Fair value
- $96.00
- Discount
- 45.2%
- Uncertainty
- High
- LSEG rating
- 2.68
- Moat
- Narrow
- Next earnings
- 2026-12-17
- Next earnings is estimate
- No
- Company name
- CarMax
- Sector
- Used car retail
- About
- CarMax is the largest retailer of used cars in the United States. On February 28, 2026, it had 256 used car stores in 110 US television markets, and customers can buy online, in a store or with a mix of both. CarMax buys cars from consumers and dealers, repairs them and sells them at a retail price, and it sells the cars that it does not retail at its own wholesale auctions. It earns more profit from extended protection plans, service and Edmunds, its online car guide. CarMax Auto Finance (CAF) lends to many of its buyers and held about $16 billion of auto loans, which it funds mostly with non-recourse securitization notes. CAF income comes from the spread between the loan rates and the funding cost, less the provision for loan losses. In fiscal 2026, CarMax sold about 780,000 used cars and 540,000 wholesale cars.
- Thesis
- The market prices CarMax for a business that lost its way and must prove that a new plan works. In fiscal 2026, sales and profits fell, the CEO left, and CarMax recorded a $141.3 million goodwill impairment because its share price and outlook fell. Keith Barr became CEO in March 2026 and cut prices to win back buyers, so gross profit per retail car fell to $2,105 in Q2 of fiscal 2027, $111 less than a year earlier. Investors fear that CarMax must give up profit per car to keep its volume, and that CAF loan losses can rise as it lends more to buyers with weaker credit. For the gap to close, three things must be true. Comparable store used unit sales must keep growing after the 13.0% rise of Q2 while gross profit per retail car stays near the Q2 level. SG&A cuts must reach the $200 million exit rate target by the end of fiscal 2027. CAF loan losses must stay in line with the allowance, which was 3.07% of loans on August 31, 2026, as the Tier 2 loans grow. The Strategic Update on November 3, 2026, gives the targets, the Q3 report on December 17, 2026, gives the next test, and the Q4 report in about April 2027 shows the full year. If the volume gains hold, the gap can close over the next four to six quarters. If price cuts do not keep buyers, or credit losses rise, profits can fall again.
- Risks
- CarMax cut prices to win back sales. Gross profit per retail used car fell from $2,216 to $2,105 in Q2 of fiscal 2027. If more price cuts are necessary to keep volume, profits can fall even when sales rise.
CAF holds about $16 billion of auto loans and now lends more to Tier 2 buyers with weaker credit. A weaker economy or higher unemployment can increase loan losses above the allowance of 3.07% of loans, and CAF depends on the securitization market for funds.
The CEO, Keith Barr, joined in March 2026, and other senior leaders left. The new strategy is not proven, and the targets come only on November 3, 2026.
Online used car sellers and dealers compete for the same buyers and for the cars that CarMax buys from consumers. Cars bought from consumers were flat in Q2 of fiscal 2027.
A securities class action, Jason Cap v. CarMax, is pending. CarMax cannot estimate a possible loss.
- Balance sheet
- Cash: $171M
Debt: $1.2B
Net debt: $1.0B
Interest cover: 8.0×
Undrawn credit line: $2.0B, to June 2028
Debt due within 12 months: $0.0M
Last debt due: 2030
CarMax has two kinds of debt. CAF funds its auto loans mostly with non-recourse notes, $15,721.3 million at August 31, 2026, which only the loans secure; they are not in debt here. Debt here is the principal of the corporate debt at August 31, 2026: a $500 million term loan due June 2029 at 4.94%, a $500 million term loan due November 2030 at 4.54%, and $200 million of 4.27% senior notes due April 2028. It does not include $482.5 million of financing obligations for stores. The $200 million of 4.17% notes was repaid when it matured in April 2026, and nothing was drawn on the $2.0 billion revolving credit facility, which matures in June 2028. Cash excludes $604.9 million of restricted cash from collections on auto loans. Interest cover is earnings before interest, taxes and other income divided by the interest expense outside CAF for the six months to August 31, 2026. CarMax said that its leverage was at the upper end of its target range, and it was in compliance with its covenants. It had $1.31 billion left on its buyback authorization.
As of 2026-08-31.
- Checkpoints
- Nov 3, 2026: Strategic Update: growth targets. Pending. Watch: Clear unit, margin and cost targets with dated milestones pass; vague targets or a lower profit outlook fail.
Dec 17, 2026: Q3 fiscal 2027 results: volume and profit per car. Pending. Watch: Comparable store used unit growth with gross profit per retail car near $2,100 and the start of buybacks pass; falling units or another large drop in profit per car fail.
Apr 2027 (estimate): Q4 fiscal 2027 results: full year and SG&A cuts. Pending. Watch: SG&A savings at the $200 million exit rate and CAF loan losses in line with the allowance pass; missed cost targets or a higher loss provision fail.
- Recent events
- 2026-09-29: CarMax reported Q2 fiscal 2027 results. Revenue rose 19.5% to $7.9 billion, retail used units rose 13.8%, and comparable store used units rose 13.0%. Gross profit per retail used car fell $111 to $2,105 because of price cuts. Diluted EPS was $1.16, up from $0.64. CarMax said that it plans to resume share buybacks at a modest level in Q3 and to hold a Strategic Update on November 3, 2026.
2026-09-23: A court moved the securities class action Jason Cap v. CarMax to the US District Court for the Eastern District of Virginia. The suit covers investors who bought shares between June 20, 2025 and November 5, 2025, and CarMax has filed a motion to dismiss.
2026-07-31: CarMax said that Diane Cafritz, Executive Vice President and Chief Innovation and People Officer, will leave the company on December 31, 2026.
2026-06-23: Shareholders elected the Board at the annual meeting, including the new directors William Cobb, James Kessler and Robert O'Shaughnessy, and approved an amended stock incentive plan.
2026-06-17: CarMax reported Q1 fiscal 2027 results and its four-pillar growth strategy, Shift into GEAR. Revenue rose 6.2% to $8.0 billion, comparable store used units fell 0.8%, and gross profit per retail used car fell $230 to $2,177. Diluted EPS was $1.31, down from $1.38.
2026-06-15: CarMax borrowed a new $500 million term loan from a bank group led by MUFG, due June 15, 2029. It used the money to pay down its revolving credit facility.