Here's Why Wall Street May Be Wrong on CarMax

"Stephens argues that 'tactical buyside players' are currently pricing in flat to down 2% same-store unit sales for Q4, but the firm's read of high-frequency data providers points to an accelerating unit sales cadence during the quarter."

"The price target raise also arrives as CarMax executes on a deliberate strategy outlined after Q3: lowering retail used unit margins to improve price competitiveness and increasing marketing spend on a total unit basis year-over-year."

"Management has also reaffirmed it remains on track to achieve at least $150 million in SG&A exit rate savings by end of fiscal 2027."

Stephens increased CarMax's price target to $43 from $39 while maintaining an Equal Weight rating ahead of the Q4 FY2026 earnings release. The firm believes Wall Street is overly pessimistic about same-store unit sales, with high-frequency data indicating better performance than expected. CarMax's strategy includes lowering retail used unit margins and increasing marketing spend. The company reported Q3 FY2026 revenue of $5.79 billion, with a decline in retail used unit sales but growth in CarMax Auto Finance income. KMX shares are down 49% over the past year.

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