Analyst Note: CarMax Upgraded But Stock Still Off

NEW YORK (AP) — An analyst upgraded shares of auto retailer CarMax Inc. on Wednesday, citing increasingly easy credit plus robust margins, including a quarterly profit the analyst called "stellar."

Goldman Sachs analyst Matthew J. Fassler removed the shares from his "America's Sell List" and rated it "neutral," raised his earnings estimates and boosted his price target to $22 from $15.

"Through a stellar August quarter, CarMax, virtually uniquely among cyclical retailers, is running margins above 'normal' levels," he wrote in a client note.

He cited strong selling prices that reflect a shortage of trade-ins.

CarMax also benefited from Washington's Cash for Clunkers program, advertising its ability to pay full price for older vehicles and thus drawing significant traffic to its stores.

While none of these factors are expected to continue, Fassler said the company's strong cost controls will keep boosting profits.

Meanwhile, William Blair analyst Sharon Zackfia said increasingly easy monthly sales comparisons to year-earlier figures also should also help the stock.

In afternoon trading, the stock fell 27 cents to $20.93.