By Peet Serfontein & Khumbulani Kunene
CarMax, headquartered in Richmond, Virginia, is the largest used-car retailer in the US. The company offers customers a broad selection of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles.
Founded in 1993, CarMax has over 220 retail locations across the country and a robust online presence, offering consumers a streamlined, transparent car-buying experience. CarMax's product offering is centred on convenience, providing a wide selection of certified used vehicles, comprehensive vehicle history reports, and a 30-day return policy to ensure customer satisfaction. Additionally, the company sells more than 765 000 used cars per year.
Technically, a developing ascending triangle pattern is supportive (see the dotted black converging trendlines on the main chart). This triangle pattern is a bullish pattern signalling potential for a stock to break higher. The price is bounded by a flat resistance level on the top and an upward-sloping trendline from below, which represents a period of consolidation where buyers push the price higher with each pullback and sellers consistently hold the resistance line. The tightening range of the price reflects increasing buying pressure as higher lows are formed.
The stock is in a trough in an Elliott Wave price cycle (Wave 15), setting the stage for a potential bullish move, particularly if it aligns with key Fibonacci retracement levels. The price is in a mark-up phase of the Wyckoff Price Cycle, further supporting a bullish stance.
The price is testing its 200-day simple moving average (SMA) of $75.69. This indicates sustained buying interest at a well-watched technical level, reinforcing the uptrend's strength.
Fading downside momentum according to the MACD indicator, as well as the recent steep upwards trajectory of the on-balance volume (OBV) indicator supports our view.
Share Information
| Share Code | KMX US |
|---|---|
| Industry | Consumer Discretionary |
| Market Capital (USD) | 11.84 billion |
| One Year Total Return | 19.29% |
| Return Year-to-Date | -0.39% |
| Current Price (USD) | 76.44 |
| 52 Week High (USD) | 88.22 |
| 52 Week Low (USD) | 61.73 |
| Financial Year End | February |
| Over the past 12 months the company's share price has achieved double-digit growth, although year-to-date returns have been muted. | |
Consensus expectations
(Bloomberg)
| FY24 | FY25E | FY26E | FY27E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 3.02 | 2.96 | 3.74 | 4.92 |
| Growth (%) | -1.85 | 26.15 | 31.51 | |
| Dividend Per Share (USD) | 0 | 0 | 0 | |
| Growth (%) | - | - | - | |
| Forward PE (times) | 25.79 | 20.44 | 15.55 | |
| Forward Dividend Yield (%) | - | - | - | |
| Earnings are expected to show strong double-digit growth over the medium term. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and Position | ABNB US - Take profit (Close the position) |
AMZN US - Take profit (Close the position) |
APH US - Take profit (Close the position) |
|---|---|---|---|
| Entry | 132.50 | 187.00 | 66.85 |
| Current | 147.37 | 210.05 | 73.95 |
| Movement | +11.2% | +12.3% | +10.6% |
| We suggest taking profit to reduce overall portfolio exposure. | We suggest taking profit to reduce overall portfolio exposure. | We suggest taking profit to reduce overall portfolio exposure. |
| Share Name and Position | DELL US (Continue to hold) |
C US - Buy (Continue to hold) |
DPZ US (Continue to hold) |
|---|---|---|---|
| Entry | 123.78 | 61.71 | 416.77 |
| Current | 137.87 | 68.11 | 448.44 |
| Movement | +11.4% | +10.4% | +7.6% |
|
A price in wave 5 of an Elliott Wave pattern remains of interest. Remains above its 200-day SMA. Upside price momentum is supportive.
Our profit target is $148.00 with a trailing stop-loss at $125.90. Exit the trade by 10 January 2025. |
A price at the confluence of the 200-day, 200-week, and 200-month SMAs remains of interest. Remains above its 200-day SMA. The start of upside price momentum is supportive.
Our profit target is $71.00 with a trailing stop-loss at $64.50. Exit the trade by 3 January 2025. |
A price that is bouncing off its 200-week simple moving average (SMA) remains of interest. Remains just below its 200-day SMA and the start of upside price momentum is supportive.
Our profit target is $482.00 with a trailing stop-loss at $422.00. Exit the trade by 20 November 2024. |
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