What Happened:
Shares of used automotive vehicle retailer Carmax (NYSE:KMX) fell 12.7% in the morning session after the company reported first quarter results with revenue and gross margin missing analysts' expectations, leading to an EPS miss. Furthermore, CarMax's management team pushed its goal of 2 million vehicles sold annually to 2026-2030, citing uncertainty in the recovery timing of the used car market. Overall, this was a mediocre quarter for CarMax.
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What is the market telling us:
CarMax's shares are quite volatile and over the last year have had 14 moves greater than 5%. But moves this big are very rare even for CarMax and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 7 months ago, when the stock dropped 9.7% on the news that the company reported second quarter revenue that narrowly exceeded Wall Street's expectations. However, earnings per share missed. Management cited persistent widespread pressures across the used car industry. Lastly, Carmax intends to resume share repurchases in the third quarter of this year (Q3'2023), noting that it has $2.45 billion remaining available for repurchase. Overall, it was a weaker quarter for the company.
CarMax is down 8.1% since the beginning of the year, and at $69.97 per share it is trading 19.7% below its 52-week high of $87.11 from March 2024. Investors who bought $1,000 worth of CarMax's shares 5 years ago would now be looking at an investment worth $947.77.
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