Research Report CarMax Inc.Taylor HoffmanOctober 1, 2018
Company: CarMax Inc.
Fair Value Estimate: $78 vs. Current Price: $70 (as of 10/10/2018)
Sector: Consumer Cyclical
Industry: Auto & Truck Dealerships
Thesis: CarMax operates the largest used vehicle dealership chain in the United States. Our forecast indicates CarMax can sustain high growth rates well into 2030 by scaling operations to 7% domestic market penetration. Competition from franchise dealers, Carvana, and online price aggregators such as Cars.com and Cargurus.com may induce margin or market share compression in coming years. The company hopes to address rising competition by releasing new e-commerce capabilities such as online appraisal, finance pre-approval, in-home-delivery, and expedited pickup. In the long-run, CarMax may face disruption from autonomous and electric vehicles that would reduce car ownership across the country.