Why Did CarMax Stock Tumble 24% Today?

Shares of CarMax (KMX) slumped 24% on Thursday morning after the company’s second-quarter earnings fell below Wall Street expectations, sparking a downgrade by Wedbush.

Total vehicle sales for the company declined 4.1% year-over-year in the quarter to 338,031 units, resulting in a 6% decrease in revenue to $6.59 billion, which fell short of the estimated $7.02 billion. Net earnings per share came in at $0.64, down from $0.85 in the corresponding quarter of 2024.

Total net income declined 28% to $95.4 million, while income from the company’s auto finance business fell 11.2% to $102.6 million. The company pinned the drop in income from the auto finance segment to an increase in the provision for loan losses, which outweighed growth in net interest margin.

On Stocktwits, retail sentiment around KMX stock stayed within ‘extremely bullish’ territory over the past 24 hours, while message volume rose from ‘high’ to ‘extremely high’ levels.

CEO Bill Nash admitted that the quarter was “challenging,” but said the used auto retailer remains confident in its long-term strategy. Wedbush subsequently downgraded CarMax to ‘Neutral’ from ‘Outperform’ and revised the price target to $54, down from $84.

The new price target implies a downside of about 5% from the stock’s closing price on Wednesday.

The "weak results" in Q2 underperformed expectations across "all key metrics," Wedbush said.  These results are amplifying investors' concerns around management's ability to sustain market leadership and drive additional growth, according to the analyst. Wedbush is now eyeing a potential revision of its estimates for the company following the earnings call.

KMX stock is down 46% this year and approximately 41% over the past 12 months. 

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