No. of Recommendations: 4
Anyone else still following Carmax?I am - 4% position for me.
We discussed it on the Falling Knives board:
https://www.shrewdm.com/MB?pid=804453885&wholeThre...I bought about a 2% position in November/December, and increased it substantially when the stock swooned in late December, to the low $50s.
That was after the publication of their Q3 report, which didn't seem so bad to me. The stock quickly rebounded to the mid- to high $60s where it is now, and Q4 results (for the period ending at the end of February) should be out in about a month - last year, they were out on April 12.
The big question is going to be whether their unit sales have recovered from the second half of last year, when there were pretty serious shortages of new and used cars on the markets. Last quarter, they sold 298,807 cars, 180,050 of them retail (down 20.8% year over year) and 118,757 of them wholesale (down 36.7%). Very roughly, they make $2000 per retail sale, and $1000 per car per wholesale sale, but both of those numbers have been under pressure as well.
I think it's good to keep in mind the large picture, which is that they are under no threat of insolvency (something that some of their competitors, like Carvana, would like to be able to say), and are very likely to keep slowly taking market share (currently about 4%) in a used car business where they are already #1 but with a long runway for increasing their share. They were making about $5 per share in the year prior to COVID, had a brief spike to $7 eps before problems with the new and used car markets and interest rate increases added some turbulence, but I think it is quite likely that they will be back to that $5-7 range as soon as markets settle down, so their current sub-$70 price is more than reasonable. If 2022 Q4 shows bad results, we may get another drop in the share prices, but that would represent an opportunity, absent some material change to their business.
dtb
