Weak Store Traffic Dings CarMax
Deep discounting on new vehicles has driven consumers to dealerships instead of a CarMax store--a trend that could last a few more quarters.
We are not changing our fair value estimate on
We see the biggest risk in the midterm for CarMax being macroeconomic risk. Recent trade war talk is rattling the stock market which could scare consumers off from buying a vehicle or lead to actual U.S. economic slowdown if companies curb investment due to fear over trade policy. Still, the U.S. vehicle fleet is on average nearly 12 years old, and tech and safety content in the typical vehicle on the road is primitive relative to used vehicles only a few years old. CarMax has the largest selection of any used vehicle retailer with nearly 50,000 units for sale, and is over twice as large as AutoNation, the largest franchise dealer, and has more than triple the selection of startup used vehicle retailer Carvana. This size brings scale and allows CarMax to invest in digital services to remain competitive and flexible to undercut competition if needed.
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