Is KMX a good stock to buy? We came across a bullish thesis on CarMax, Inc. on Deep Research Global’s Substack. In this article, we will summarize the bulls’ thesis on KMX. CarMax, Inc.’s share was trading at $53.66 as of June 18th. KMX’s trailing and forward P/E were 33.33 and 22.73 respectively according to Yahoo Finance.
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CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles and related products in the United States. KMX reported a mixed but strategically important Q1 FY2027 performance, where accelerating revenue growth was offset by margin compression as the company deliberately prioritized market share over per-unit profitability.
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Net revenues rose 6.2% year over year to $8.01 billion, exceeding expectations, while total units increased 3.3% to 392,357, reflecting improving demand conditions even as comparable store used unit sales dipped 0.8%, indicating modest underlying softness in same-store traffic.
EPS declined to $1.31 from $1.38, and gross profit fell 4.4% as retail gross profit per used unit dropped $230 to $2,177, driven by intentional pricing investment to remain highly competitive in a structurally inflationary used-car market. The company increased average selling prices to $27,288, reinforcing its strategy of leaning into volume and inventory turnover rather than margin expansion. SG&A declined 3.7% year over year, signaling early traction from management’s cost discipline, with a clear $200 million exit-rate savings target by FY2027.
CarMax Auto Finance remained stable with $140.2 million in income, while credit losses improved, highlighting resilience in the captive finance engine. New CEO Keith Barr introduced a four-pillar strategy focused on omnichannel expansion, operational efficiency, and customer experience, while also reinforcing balance sheet flexibility through a newly added $500 million term loan and paused buybacks.
Although near-term earnings pressure reflects reinvestment and strategic repositioning, the broader setup remains constructive, as CarMax strengthens its competitive moat in omnichannel used auto retailing. With improving unit trends, disciplined cost actions, and potential multiple expansion as margins stabilize, the stock’s long-term upside remains meaningfully higher if execution on the new strategy continues to accelerate.
Previously, we covered a bullish thesis on Carvana Co. (CVNA) by Investing City’s Substack in May 2025, which highlighted its vertically integrated e-commerce model, financing strength, and data-driven pricing advantages in the used vehicle market. CVNA’s stock price has appreciated by approximately 2.59% (adjusted for stock split) since our coverage. Deep Research Global’s Substack shares a similar view but emphasizes CarMax’s omnichannel scale, disciplined cost reductions, and strategic pivot toward market share expansion under new leadership.
CarMax, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held KMX at the end of the first quarter which was 52 in the previous quarter. While we acknowledge the risk and potential of KMX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KMX and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
