CarMax Stock Downgraded After Difficult Year for KMX Bulls

CarMax Inc. (NYSE:KMX) is facing headwinds as evidenced by a recent analyst downgrade and a significant drop in its stock price. The challenges stem from leadership changes, disappointing financial forecasts, and broader market pressures, painting a concerning picture for the used-car retailer.

Morgan Stanley analyst Daniela Haigian downgraded CarMax's stock from “Overweight” to “Equal Weight,” also reducing the price target from $56 to $35. Haigian pointed to the deterioration in volume growth, execution challenges, and uncertainty surrounding new leadership as factors likely to keep shares range-bound. The analyst believes that investor confidence hinges on the successful implementation of a new transformation strategy under a permanent CEO.

The stock has experienced a tough year, with KMX falling 60% year-to-date. Following the announcements of a CEO departure and a weak financial outlook, CarMax shares fell more than 15% on November 6, 2025, and came perilously close to new lows on Friday's session.

The company's woes began to crystalize with the announcement that CEO Bill Nash would be stepping down by December 1, 2025. He will be succeeded on an interim basis by board member David McCreight, while Board Chair Tom Folliard will assume the role of Interim Executive Chair. The search for a permanent CEO is underway, with Russell Reynolds Associates engaged to assist.

Adding to the uncertainty, CarMax pre-announced a disappointing financial outlook for its fiscal third quarter ending November 30, 2025. The company expects an 8% to 12% decrease in comparable store used unit sales and earnings per diluted share between $0.18 and $0.36. These figures are substantially below analysts' earlier expectations of around $0.70 per share. The company attributed the anticipated decline to sluggish retail demand, sharp depreciation in its wholesale business, and increased marketing expenditures.

Price Targets

CarMax's challenges are not isolated but reflect broader market difficulties. The company has struggled to resell vehicles at prices that reflect earlier, higher acquisition costs. This is compounded by a credit crunch in the automotive space, making it more difficult for buyers to secure loans.

The board has acknowledged the need for strategic adjustments to regain market strength. Interim CEO David McCreight and Interim Executive Chair Tom Folliard have emphasized their focus on driving sales, enhancing profitability, and reducing costs during this transitional period.

The market’s reaction to these events suggests a lack of confidence in CarMax's near-term prospects. The company's ability to navigate these challenges, restore investor confidence, and implement effective strategic adjustments will be critical in determining its future trajectory and whether the stock can recover from its current slump.