Investing.com -- Stephens upgraded CarMax Inc (NYSE:KMX) to Overweight from Equal-Weight and raised its price target to $90 from $86 ahead of the company’s fiscal fourth-quarter 2025 results.

The company is expected to report earnings on April 10.

Investors can rely on CarMax’s proven discipline and consistency in managing unit sales, credit metrics, and profitability, analyst at Stephens said.

Stephens cited CarMax’s improving fundamentals and consistent operational performance as key reasons for the upgrade.

The firm noted that CarMax’s valuation, now trading between 9x and 11.5x next twelve months EBITDA, is back in line with historical averages, creating an attractive entry point for investors.

Stephens raised its estimates for unit sales, revenue, and EBITDA for fiscal 2025 and 2026. For the fourth quarter, the firm expects 183,900 units sold and revenue of $5.86 billion, slightly above Street estimates.

Looking ahead, Stephens projects continued strength in 2025, with unit sales of 818,700 and revenue of $26.9 billion, driven by favorable credit trends and operational stability.

CarMax could also see a slight benefit from certain tariff scenarios in the first year, Stephens noted. The firm highlighted the company’s ability to manage operating expenses effectively, which could further support growth.

Stephens emphasized that CarMax’s long-term growth potential, combined with a reasonable valuation range, makes it a compelling opportunity for both long-term and tactical investors. “Should KMX’s shares break below the $72 level, we believe investors can increase their position with confidence and let time be their friend,” the note added.

With CarMax’s fundamentals strengthening and its valuation normalizing, Stephens believes now is the right time to take a more positive stance on the stock.

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