Used Autos (CVNA, KMX): Investor Discussion

Carmax Inc

Consumer, Industrial/Transportation


Presented:06/27/2024
Price:$73.33
Cap:$11.54B
Current Price:$73.67
Cap:$11.41B

Presented

Date06/27/2024
Price$73.33
Market Cap$11.54B
Ent Value$29.87B
P/E Ratio28.81x
Book Value$39.44
Div Yield0%
Shares O/S157.33M
Ave Daily Vol2,343,166
Short Int14.20%

Current

Price$73.67
Market Cap$11.41B
CarMax, Inc. is a holding company, which engages in the retail of used vehicles and wholesale of vehicle auction operators. It operates through the CarMax Sales Operations and CarMax Auto Finance (CAF) segments. The CarMax Sales Operations segment consists of all aspects of its auto merchandising and service operations. The CAF segment pertains to its finance operation, which offers vehicle financing services to customers buying retail vehicles. The company was founded by Richard L. Sharp and William Austin Ligon in 1993 and is headquartered in Richmond, VA.

On June 27, 2024, DeMatteo Research hosted a discussion on the used autos industry with five investors. The conversation centered around the market landscape (affordability, supply, overall health), KMX (market share trends, shift to subprime financing, outlook), CVNA (recent performance, near-term setup, inspections & reconditions, growth potential), and investor positioning in KMX & CVNA.

Publicly traded companies mentioned herein: CarMax Inc (KMX), Carvana Co (CVNA)

Market Landscape

One participant started the conversation by noting the lack of clarity around the used car market over the next 12 – 36 months. On one hand, he could see muted transaction volumes and growth challenges due to several potential headwinds like persistent affordability issues (pricing and/or financing), competition from new car supply, and lower GPUs from older/more depreciated cars that require more inspection & reconditioning work. He could also envision a scenario where the cost of financing decreases, used cars remain cheap relative to new cars, and a resilient labor market provides capital to consumers and allows them to take financing risks. Overall, it seems like the industry has benefited recently from some of those dynamics and he is unsure whether those tailwinds can continue, causing him to lean bearish. 

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Idea Discussion

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