Earlier this month, the company reached a $1 million settlement with 36 state attorneys general investigating CarMax for selling used vehicles with open recalls even though the company made claims that it was selling safe vehicles. The worse news is that demand for used vehicles has dropped, forcing dealers to lower prices in order to move inventory. Another overhand is the decrease in auto leasing, leading to fewer vehicles available for the used car pool.
Of 19 analysts covering CarMax stock, 10 have a Buy or Strong Buy rating and another seven have Hold ratings. At a recent price of around $58.10 a share, the upside potential based on a median price target of $72.00 is 23.9%. At the high price target of $155.00, the upside potential is 167%.
Third-quarter revenue is forecast at $7.28 billion, which would be down 10.6% sequentially and 14.7% lower year over year. Adjusted EPS are expected to come in at $0.70, down 11.5% sequentially and by 54.2% year over year. For the full 2023 fiscal year ending in February, CarMax is expected to report EPS of $3.88, down 43.5%, on sales of $31.72 billion, down 0.6%.
CarMax stock trades at 15.0 times expected 2023 EPS, 13.5 times estimated 2024 earnings of $4.29 and 9.8 times estimated 2025 earnings of $5.90 per share. CarMax’s 52-week trading range is $54.85 to $139.80. CarMax does not pay a dividend, and total shareholder return over the past 12 months is negative 57.7%.
Micron
Shares of semiconductor maker Micron Technology Inc. (NASDAQ: MU) have lost nearly 38% over the past 12 months. Since reaching a 52-week high in early January, the stock has dropped by nearly 45%. Semiconductor stocks have dropped by a third over the past year and by about 36% in 2022. Micron reports earnings after markets close Wednesday.
In a recent visit to Malaysia, CEO Sanjay Mehrotra said that Micron’s customers are reducing inventories as demand for smartphones and PCs has weakened. The company has cut its own supply growth for the next few years and will be lowering its capital spending as well. Mehrotra emphasized that these are near-term issues that he expects things to improve over the “next few quarters.”
Of 37 analysts covering the stock, 27 have a Buy or Strong Buy rating and another eight rate the shares at Hold. At a price of around $51.70 a share, the upside potential based on a median price target of $67.00 is about 29.6%. At the high target of $100.00, the upside potential is 93.4%.
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