E CarMax In 2019

By Quad 7 Capital and Bad Beat Investing staff

CarMax (KMX) operates in a highly competitive market, and is involved in selling a range of used vehicles in the United States. Carmax was once a growth stock, but with the pace of growth slowing, we look at the name as more of a value proposition these days. Even better from our firm's perspective, the stock has been a magnificent trading stock, with very clear swings up and down, allowing the savvy traders among our membership to trade this name frequently. From a longer-term investment standpoint the stock really remains a 'market perform' type investment. After the recent market malaise the stock has flirted with trading in the high $50 range, and we think you are getting a fair price at those levels based on forward expectations. In the upper $50 range, the stock is attractive both from a trader's perspective and in the medium-term. In this column, we will discuss recent performance trends and our expectations for 2019 and beyond.

The chart

The reason this has been a favorable stock for traders is that shares of CarMax are volatile. In the last year two years shares have really been in a $60-$75 trading range:

Source: BAD BEAT Investing

Our team at BAD BEAT Investing provided this chart, and highlights in simple fashion the lines to really look for. With shares below $60, and considering the performance of the name, we think the stock has upside. We see $58 as a support and buy line with a longer-term support just under $55.

While traders continue to scalp profits thanks to swings in price, for longer-term investors there is no doubt that the action has been a bit frustrating of late. For our followers, we think money can be made in this name, by buying in the high $50 range and selling at around $65. Longer-term, we see a return to $70, based on valuation. This is where performance comes in. The company continues to grow, but a bit more slowly than in the past. At this point we see the competition as heavy, but there is some value here. Let us discuss performance and key issues surrounding the name.

The biggest risk to the company is the sector it operates in

CarMax sells used cars. That is the business. The company is profitable, and sales are growing over time, but this is a crowded market. Carmax has to battle for market share with major auto dealerships, local/independent used lots, and even online sales of cars with home delivery. CarMax has done an outstanding job by branding itself and increasing sales year-after-year.

1 2 3 4
View single page >> |

No positions in any stock mentioned

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.