CarMax Credit Worries Mount: November Data Shows Soft Trends, Rising Defaults

CarMax Inc's (NYSE:KMX) CAF (CarMax Auto Finance) securitization data released on Monday revealed that trends remained soft in November, according to Wedbush.

The CarMax Analyst: Analyst Scott Devitt maintained a Neutral rating and price target of $40.

The CarMax Thesis: November has typically been a month of weaker trends than October and September, Devitt said in the note.

Check out other analyst stock ratings.

The report showed a sequential increase in delinquency rates, in line with the historical average, he added.

The analyst estimates the portfolio-level delinquency rate rose 19 basis points (bps) month-on-month, consistent with the seasonal average, and the cumulative net loss rate increased 7 bps, much steeper than the seasonal average of 3 bps.

"Results thus far are trending in line with management commentary, in our view, which suggests that delinquencies will continue to ramp through the rest of the year, before improving again during the tax refund period, he further wrote.

Investors have been increasingly concerned about "the company’s credit exposure, and more broadly, management’s ability to sustain market leadership," Devitt stated.

KMX Price Action: CarMax shares were up 0.87% at $40.98 at the time of publication on Wednesday

Investors can gain exposure to CarMax through ETFs like iShares S&P SmallCap 600 Value ETF (NYSE:IJS), Vanguard S&P Small Cap 600 Value ETF (NYSE:VIOV), and SPDR S&P Retail ETF (NYSE:XRT), according to Benzinga Pro data.

Read More:

• 10 Retail Stocks To Watch As Holiday Season Begins

Photo: Shutterstock