Karishma Vanjani

Investors should buy CarMax stock ahead of earnings, Stephens said in an upgrade of the shares.

Analyst Jeff Lick boosted his rating on shares of CarMax, a seller of used vehicles, to Overweight from Equal Weight on Wednesday. He raised his target price to $90 from $86 earlier.

The stock popped 1.7% to $75.50 Wednesday morning. Investor sentiment toward the shares has been poor lately, with CarMax falling 9% so far this year and 10% over the past month.

The company will report earnings for the latest quarter on April 10. Lick predicts it will be a good report; he raised his earnings estimate for the fiscal fourth quarter, which ended around late February, to 69 cents per share from 67 cents previously. Market consensus is for 65 cents a share, according to FactSet.

"Our analysis of both real-time unit sales and credit metrics give us comfort in our calendar 2025 estimates," especially the first half of the year, he wrote in a note.

Its experienced management is another plus. Lick has previously pointed out that CarMax has essentially had only three CEOs over its 31-year history, each with a long tenure at the company.

"KMX management is well-tenured and disciplined," he said Wednesday. The proof, he says, is in the company's consistent profit levels. At least as far back as fiscal 2023, CarMax's gross profit per unit of used vehicles has hovered consistently around $2,300.

If anything, investors should keep an eye out for a buying opportunity, Lick added.

"Should KMX's shares break below the $72 level, we believe investors can increase their position with confidence and let time be their friend," he added.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com .

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March 26, 2025 10:41 ET (14:41 GMT)

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