CarMax (NYSE:KMX) is the largest used car sales company in the United States. With 173 locations, revenue of $14 billion, and sales of more than 500,000 vehicles per year, it is a well known and valuable business.
Recent market trends have been broadly negative for auto sellers, and CarMax is particularly vulnerable to a downturn in the used auto market. With off-lease vehicle inventories rising, credit standards deteriorating, and a pricey valuation, CarMax will see a significant correction in its share price in the near future. This report will focus on auto industry fundamentals, valuations, and technical analysis, to show that CarMax will fall in share price significantly and quickly.
Fundamental Analysis
In June of this year, Morgan Stanley released its report on the state of the auto market. Their analysis focused on two major headwinds for the auto industry: inventories and lending standards.
