Here’s Why Wall Street May Be Wrong on CarMax

Stephens raised its price target on CarMax (NYSE: KMX | KMX Price Prediction) stock to $43 from $39 while maintaining an Equal Weight rating ahead of the company’s April 14 Q4 FY2026 earnings release. The firm’s key argument: Wall Street may be too pessimistic on same-store unit sales, and high-frequency data suggests the quarter is tracking better than the buy side expects. For long-term investors watching a beaten-down name, the call is worth understanding before results hit.

So far this year, shares of KMX are up 2.77%, but over the past year, the stock has lost 51.21%.

The Analyst’s Case

Stephens argues that “tactical buyside players” are currently pricing in flat to down 2% same-store unit sales for Q4, but the firm’s read of high-frequency data providers points to an accelerating unit sales cadence during the quarter. If that read is correct, CarMax could deliver a positive surprise relative to muted expectations, which is a classic setup for a stock that has already absorbed significant bad news.

The price target raise also arrives as CarMax executes on a deliberate strategy outlined after Q3: lowering retail used unit margins to improve price competitiveness and increasing marketing spend on a total unit basis year-over-year. Management has also reaffirmed it remains on track to achieve at least $150 million in SG&A exit rate savings by end of fiscal 2027.

Company Snapshot

CarMax is America’s largest used-vehicle retailer, operating two segments: CarMax Sales Operations and CarMax Auto Finance. The company reported Q3 FY2026 revenue of $5.79 billion, with retail used unit comparable sales declining 9% year-over-year. A bright spot was CarMax Auto Finance, where income grew 9.3% to $174.7 million. The company is also navigating a CEO transition, with David McCreight serving as Interim President and CEO while a permanent search is underway.

Why the Move Matters Now

KMX shares currently trade at $40.31, down 49% over the past year and well below the 52-week high of $81.79. The stock trades at a trailing P/E of 13x and a forward P/E of 15x, with the consensus analyst price target sitting at just $40.08. The broader analyst community remains cautious, with 14 Hold ratings and four Strong Sell ratings versus only two Buy ratings. Prediction markets currently price a 55% probability that CarMax misses Q4 earnings expectations, underscoring how low the bar has been set.

What It Means for Your Portfolio

Stephens is not calling for a breakout, but it is flagging a potential disconnect between Street expectations and real-time demand signals. For retirement-focused investors, the Equal Weight rating signals caution is still warranted given the leadership transition, persistent macro headwinds reflected in consumer sentiment sitting at 56.6, and a used-vehicle market still adjusting to affordability pressures. The April 14 earnings report will be the critical test of whether the Q4 unit sales cadence Stephens is tracking translates into results that can finally stabilize this stock.