KMX · CarMax Inc.

The thesis

CarMax's 3 November 2026 Shift into GEAR plan holds profit per car flat rather than restoring it, so earnings growth must now come from volume, costs and buybacks. The report for the quarter ending 30 November 2026 tests that case. The rating moves down to low: the update answered the question the prior note posed, and the shares look more likely to lag the S&P 500 than lead it over the next three months.

The company targets mid-single-digit compound annual growth in used retail units and mid-teens compound annual growth in adjusted earnings per share (EPS) through fiscal 2030, from a fiscal 2026 adjusted EPS of $2.91 (CarMax 8-K, 3 November 2026). Its presentation says retail gross profit per unit stays "consistent from FY27," with several hundred dollars per unit of reconditioning and logistics savings reinvested in price.

Morningstar reported a 5.4% fall in the shares on 3 November 2026. The close on 5 November 2026 was $52.60 (adjusted daily closes), 18.1% below the 52-week high of $64.22 and 10.5% lower over three months.

The narrative is maturing: the turnaround is widely known, and the 3 November 2026 update met selling, as the 29 September 2026 earnings beat did.

Bullish and bearish views on CarMax Inc.

The bull case on CarMax Inc. (KMX), in brief: Volume growth is large and recent. The bear case: Profit per car has no planned recovery.

Bull case

• Volume growth is large and recent. Comparable-store used units rose 13.0% and total used units rose 13.8% to 227,391 in the quarter ended 31 August 2026 (CarMax release, 29 September 2026). Revenue grew 19.5% to $7.9 billion.
• Earnings beat by a wide margin. Diluted EPS was $1.16 in that quarter, up 81.3% from $0.64 a year earlier (CarMax release, 29 September 2026), against a $0.73 consensus reported by Daily Political.
• Costs are planned to grow slowly. The 3 November 2026 presentation targets low-single-digit annual growth in selling, general and administrative expense from an adjusted $2,403.6 million in fiscal 2026. It also repeats $200 million of run-rate savings by the end of fiscal 2027.
• Buybacks are due to resume. CarMax said on 29 September 2026 that repurchases would restart in the quarter ending 30 November 2026, with $1.31 billion of authorization remaining. Net leverage was 1.9 times for the twelve months ended 31 August 2026, inside the 1.5 to 2.0 times long-term range in the presentation.
• Some targets sit well above the shares. Bank of America upgraded the stock to Buy with a $65 target on 15 October 2026. JPMorgan's target is also $65 at a Neutral rating (Benzinga, 4 November 2026).

Bear case

• Profit per car has no planned recovery. Retail gross profit per used unit was $2,105 in the quarter ended 31 August 2026, down $111 from a year earlier, and wholesale gross profit per unit was $858, down $135 (CarMax release, 29 September 2026). The 3 November 2026 presentation directs savings into price.
• Finance income faces new pressure. The presentation says expansion in the Tier 2 credit segment, targeted at 40% penetration by fiscal 2030 from 10% in Q2 fiscal 2026, pressures CarMax Auto Finance income near term through upfront loss provisions. Mizuho called the reset in finance expectations an incremental headwind (Investing.com, 4 November 2026).
• Target changes after the update were mixed. JPMorgan cut its target to $65 from the $70 it set on 18 September 2026 (Benzinga; Daily Political). Mizuho raised its target to $50 from $43, which still sits below the $52.60 close.
• Carvana is growing much faster. Carvana reported third-quarter retail units of 217,385, up 39%, on revenue of $8.04 billion, up 42% (Carvana 8-K, 28 October 2026). Its total gross profit per unit fell $365 to $6,997, so its volume gain also came with lower per-unit profit.
• Spending rises before the payoff. The presentation sets capital spending at about $500 million a year starting in fiscal 2028, for locations, technology and artificial intelligence capabilities.

Price setup

The last close was $52.60 on 5 November 2026, against $53.89 on 27 October 2026 and $49.82 on 14 October 2026 (adjusted daily closes). The 14-day relative strength index, a momentum gauge where readings between 30 and 70 are neutral, was 48.4.

Daily Political quoted a 50-day moving average of $56.79 and a 200-day moving average of $49.55 on 4 November 2026. The shares sit between the two, and $52.60 is under the 50-day average.

Crowding evidence is thin. The price shows no wide gap above a rising average, and the next earnings report is not imminent. The company's stated plan is to repurchase shares. The invalidation level of $47 sits below the 200-day average, the $49.82 close of 14 October 2026 and BNP Paribas's $48 target set on 30 September 2026.

Catalysts, next 30 days

• ~6 November 2026 (est.): Cox Automotive's official October Manheim Used Vehicle Value Index. It confirms or revises the 207.4 mid-month reading, against 205.9 for the official September index.
• ~17 November 2026 (est.): Cox Automotive's mid-November Manheim reading, a further check on wholesale prices and trade-in values.
• ~18 December 2026 (est.), outside the 30-day window: The report for the quarter ending 30 November 2026, for which CarMax has not announced a date. The case turns on it: it is the first results test of the new plan and should show whether repurchases restarted.

What would change the view

The case breaks if retail gross profit per used unit falls below $2,105 in the quarter ending 30 November 2026, because management has framed that profit as steady. It also breaks if comparable-unit growth slows sharply from 13.0% while per-unit profit stays flat, since volume is now the main engine of the plan.

The low rating would prove too cautious if that report shows double-digit comparable-unit growth, retail gross profit per unit up from a year earlier and repurchases under way. A sustained move above the $56.79 50-day average after such a report would support that reading.

On price, a daily close below $47 would end the case, placing the shares under BNP Paribas's $48 target and the $49.82 close of 14 October 2026.

What it trades with

The shares carry a beta of 1.22 (Daily Political, 4 November 2026), a measure of how much they have moved relative to the broad market. They respond to used-vehicle prices through the Manheim index and to auto loan rates, which Cox Automotive said in its October 2026 mid-month report were starting to rise.

Carvana is the closest listed comparison, and its results read directly on industry unit share and per-unit profit. CarMax Auto Finance adds consumer-credit exposure, so loan-loss provisions and funding spreads can move reported earnings apart from retail operations.