Carmax Inc (NYSE: KMX) is being crushed by the likes of AutoNation Inc and Carvana Co, says Landon Swan – the cofounder of LikeFolio.
Shares of the used vehicle retailer have lost about 20% over the past three months.
Swan shares his view on Carmax stock
Carmax reported $7.11 billion in revenue for its first financial quarter on Friday that missed Street estimates by some $50 million.
At 97 cents a share, the New York listed firm took a material year-on-year hit to its quarterly EPS as well. Speaking with the Schwab Network, Landon Swan said today:
We’re looking at lower lease volumes, which usually means there’s lower supply. There’s just less cars for them to buy which means there’s less cars for them to sell – and they’re paying more.
Carmax stock does not currently pay a dividend either.
KMX is no the ‘leader of the pack’
Landon Swan agreed that Carmax Inc beats AutoNation and Carvana in terms of happy customers at 69%.
Still, he recommended against owning KMX shares as the Richmond headquartered firm is failing to expand its market share and become the “leader of the pack”.
Carmax stock remains unattractive for Swan also because its management recently pushed back on its goal of selling 2 million cars annually from 2026 to 2030.
Data we’ve got is just showing them really falling behind when it comes to following through and getting the customers.
Swan’s view on Carmax shares is different from Wall Street that rates them at “overweight” at writing.
Why else is Carmax being left behind?
Landon Swan is somewhat dovish on Carmax stock also because its footprint in eCommerce is far behind AutoNation and Carvana.
He agreed that selling used vehicles is a tough business and said software updates and macroeconomic factors are making people opt in favour of keeping their cars for longer which is also weighing on KMX.
We don’t have great news on them [Carmax Inc]. We don’t have any data that says it’s turning around.
Carmax spent some $104 million on buying back 1.4 million shares of its common stock in Q1. It still has another $2.26 billion remaining under outstanding repurchase authorisation. Bill Nash – the chief executive of KMX said in a press release today:
We launched our first non-prime asset-backed securitization deal early in the second quarter as part of the expansion of our securitization program that will enable incremental growth in finance income.
Note that Carmax shares traded at a high of over $150 during the pandemic.
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