CarMax's (KMX) auto finance division saw lower delinquency trends and loss rate trends that are "in line to better" in January, reversing the deterioration in December, Wedbush said in a note Wednesday.

"On a [year over year] basis, the portfolio-level delinquency rate decreased 50 [basis points], improving further from the trailing three-month trend of -42 bps," according to the note. "On the other hand, the cumulative net loss rate increased 44 bps y/y, about in line with the trailing three-month trend of +43 bps."

The firm said a combined measure of delinquency and extension rates also showed improvement, declining 4 bps sequentially and down 20 bps year on year, which could further strengthen as tax refund season approaches.

Wedbush said that CarMax is well-positioned to gain market share in the used car market, supported by strong vehicle sourcing, competitive pricing, and growing first-party lending.

The brokerage has an outperform rating on CarMax's stock with a $100 price target.

Shares of CarMax were down 2.6% in recent trading.

Price: 86.88, Change: -2.31, Percent Change: -2.59