CarMax Inc (NYSE:KMX) is facing a mixed outlook as recent securitization data and preliminary guidance for the next quarter highlight ongoing challenges in the used-car market, according Wedbush analysts.
The analysts have a ‘Neutral’ rating on the stock, with a 12-month price target of $40, after the company reported October trends from its CAF securitization trust.
According to Wedbush, October data showed “trends were soft for another month, with delinquency and net loss rates improving slightly month-over-month, while extension rates deteriorated sharply.”
The analysts wrote that while delinquency rates were above historical averages, they would have increased further if not for the impact of the new securitization.
“Results thus far are trending in line with management commentary, which suggests that delinquencies will continue to ramp through the rest of the year, before improving again during the tax refund period,” they wrote.
Since CarMax’s last quarterly report, consensus CAF income estimates for 2025 have fallen roughly 10%, reflecting investor concerns about credit exposure and management’s ability to maintain market leadership.
Wedbush added that it will continue to monitor the performance of CarMax’s portfolio to assess potential impacts on loan loss provisions and exposure to lower-tier consumers.
The company also announced a leadership change in early November, with CEO Bill Nash stepping down from his role and the Board effective December 1, the firm highlighted.
CarMax shared preliminary guidance for Q3 fiscal 2026, signaling a slowdown in used-unit sales and lower earnings. The company expects comparable store used unit sales to decline between 8% and 12% year-over-year, below initial Street expectations of -4% by about 605 basis points at the midpoint, Wedbush noted.
Diluted EPS is projected in the range of $0.18 to $0.36, well under consensus estimates of $0.81, as CarMax navigates declining retail sales, sharp depreciation in the wholesale business, and higher marketing expenses.
On the financing side, CarMax priced its 2025-4 securitization in October with a collateral spread of about 5.3%, roughly 60 basis points higher than the July 2025-3 prime transaction.
The $1.3 billion deal featured a weighted average collateral coupon of 9.4% and an average credit score of 759, both modestly above the prior prime transaction. Wedbush noted that the deal size was smaller than the previous prime transaction but larger than the most recent non-prime securitization.
“Soft trends in CAF securitizations, combined with weaker preliminary guidance and leadership changes, suggest a cautious near-term environment for CarMax,” the analyst wrote.
Shares of Carmax traded hands at $33 on Tuesday afternoon, down almost 60% so far this year.