CarMax Well-Positioned to Lift Market Share After Pandemic

CarMax was upgraded to outperform from neutral at Wedbush, which says the company is well-positioned for post-coronavirus sales.
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Shares of CarMax  (KMX) - Get Report rose Tuesday after the auto retailer was upgraded to outperform from neutral by Wedbush analysts, who see the company recovering well from the coronavirus pandemic. 

The firm also raised its price target on CarMax to $90 a share from $70, indicating  18% potential upside from the stock's Monday closing price. 

Wedbush analyst Seth Basham wrote that the company is well-positioned to increase its market share once the coronavirus pandemic starts to wind down. 

Looking at the rest of the year, the analyst wrote that "consumers’ preference for private transportation over public transportation should help further reduce comp pressure, although this preference will be partially offset by consumers' inclinations to drive less if work-from-home and certain social-distancing measures remain in effect."

While affordability and credit access will be roadblocks to recovery for auto retailers as the economy begins to exit the coronavirus recession, discretionary spending is expected to increase year over year thanks to government stimulus checks. 

"While the longevity of the pandemic and the resulting impact on the economy will be important determinants in the shape of KMX’s recovery, we currently forecast positive comparisons by the fiscal fourth quarter (early 2021) and see KMX earning nearly as much in 2021 as in 2019," Basham wrote.

Basham also notes that 40% of consumers are willing to buy a car online over the next six to nine months, compared with just 30% of consumers prior to the pandemic. 

CarMax shares at last check were 0.8% higher at $76.53.