Will CarMax’s (KMX) Profit Drop, Lawsuits, and Buybacks Change Its Digital and Credit Narrative?

• CarMax, Inc. has already reported third-quarter 2025 results showing sales of US$150.63 million and net income of US$62.22 million, alongside ongoing share repurchases and multiple securities class action lawsuits alleging misleading disclosures around demand and its auto finance portfolio.
• Beyond weaker earnings, the combination of leadership transition, aggressive cost-cutting plans, and legal scrutiny raises fresh questions about the durability and quality of CarMax’s growth drivers.
• We’ll now examine how these profit declines and legal challenges could influence CarMax’s existing investment narrative around digital growth and credit expansion.

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CarMax Investment Narrative Recap

To own CarMax today, you need to believe its omnichannel used car model and in-house finance arm can still compound earnings despite recent profit pressure and leadership turnover. In the near term, the key catalyst is whether management’s cost-cutting and digital initiatives can stabilize margins, while the biggest risk is that the new legal scrutiny around alleged demand pull-forward and loan portfolio risks further erodes confidence in CarMax Auto Finance as a growth engine.

Among the latest developments, the third quarter 2025 earnings miss, with sales down to US$150.63 million and net income nearly halved year on year, is most relevant. These weaker results intersect directly with CarMax’s core catalysts of digital growth and credit expansion by testing how resilient its margins and underwriting discipline really are at a time when multiple class actions are questioning the quality of reported growth.

Yet investors should also weigh how the allegations around CarMax’s auto finance loan portfolio could...

Read the full narrative on CarMax (it's free!)

CarMax's narrative projects $29.8 billion revenue and $919.9 million earnings by 2028.

Uncover how CarMax's forecasts yield a $38.31 fair value, in line with its current price.

Exploring Other Perspectives

Five Simply Wall St Community fair value estimates for CarMax span from US$38.31 to US$99.80, showing how far apart individual views can be. You are seeing this wide dispersion just as recent earnings pressure and lawsuits focus attention on whether CarMax’s full credit spectrum lending can genuinely support future profitability.

Explore 5 other fair value estimates on CarMax - why the stock might be worth over 2x more than the current price!

Build Your Own CarMax Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your CarMax research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
• Our free CarMax research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate CarMax's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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