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CarMax (NYSE: KMX) stock hit a five-year low on Thursday, plummeting some 20% to $45.60 per share. That is the lowest closing price since the stock dropped to $37 per share in March 2020 after the pandemic hit.

The nation’s largest used car dealer had a challenging quarter, as both revenue and earnings were down year-over-year.

• Revenue: $6.6 billion, down 6% year-over-year and lower than estimates of $7.0 billion.
• Net earnings: $95.4 million, down 39% year-over-year.
• EPS: 64 cents per share, down 25% year-over-year.
• Adjusted EPS: 99 cents per share, below estimates of $1.04 per share.

Retail vehicle sales dropped 5.4% year-over-year to 199,729 while comparable store sales decreased 6.3% from the prior year’s second quarter. Revenue from the sale of used cars fell 7.2% compared to the same quarter a year ago. The average selling price for retail sales was $25,993, down 1% year-over-year.

CarMax bought 293,000 vehicles from consumers and dealers in the quarter, down 2.4% compared to last year’s second quarter.

Tariff impact

CarMax reduced expenses by 1.6% in the quarter to $601.1 million. Management also established plans for $150 million more SG&A spending cuts over the next 18 months. But it wasn’t enough to offset lower than expected sales.

Q2 sales were impacted by tariffs in a couple of ways, explained President and CEO Bill Nash on the earnings call. One, tariff speculation caused a spike in sales in April and March, which helped Q1 sales. CarMax ramped up inventory ahead of Q2 to meet the pre-tariff demand. However, in depreciation negatively impacted prices and sales in Q2.

In the second quarter, we responded by lowering retail margins to drive sell-through, and we intentionally slowed buys to balance our inventory with sales. This strategy has worked as both price competitiveness and inventory position have improved since that time and have put us in a better position for the third quarter,” Nash said.

While these maneuvers hurt results in Q2, they should set up CarMax for better results moving forward, said Chris Ballard, managing director at Check Capital Management.

Their first quarter 2026 was good and the second quarter of their fiscal year was poor, but it appears they have things back under control and we believe we’ll see more consistent outcomes in the quarters ahead,” Ballard said. “If this ends up being the case, the stock is quite undervalued, trading at a valuation not seen since some points during and immediately following the Global Financial Crisis.”

Is CarMax a buy?

CarMax’s stock opened down another 1% on Friday. Year-to-date, CarMax stock is off 44%.

While the stock is cheap, trading at 13 times earnings, it is facing some headwinds. Used car prices began ticking back up, as the latest inflation data showed a 1% increase in August, the largest monthly increase this year.

Analysts at Needham and Baird lowered their price targets to $60 but maintained a buy rating. That would suggest 30% upside.

The visibility is a little cloudy because of the uncertain tariff and macroeconomic environment, but it might be worth kicking the tires on its low valuation alone. Can it go much lower than a five-year low?

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