Morningstar

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.

Securities In This Article
CarMax Inc
(KMX)

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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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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