CarMax, Inc. (KMX): A Bull Case Theory

We came across a bullish thesis on CarMax, Inc. on Stock Region Research’s Substack by Stock Region. In this article, we will summarize the bulls’ thesis on KMX. CarMax, Inc.'s share was trading at $66.67 as of June 26^th. KMX’s trailing and forward P/E ratios were 18.42 and 17.57, respectively, according to Yahoo Finance.

CarMax delivered a strong first-quarter performance that exceeded expectations and reinvigorated investor confidence. The company reported Q1 EPS of $1.38, beating estimates by $0.19, driven by a 9% increase in retail used unit sales and a 12.8% jump in gross profit. Notably, CarMax achieved a record-high $2,407 gross profit per retail used unit, underscoring its operational efficiency and pricing power in a competitive used car market.

The stock responded sharply, surging 10.73% in pre-market trading, reflecting renewed market optimism. CarMax’s strategic initiatives, including an expansion of its non-prime funding program, aim to broaden its customer base and enhance financing flexibility, especially in a tightening credit environment. Simultaneously, a substantial $199.8 million share buyback signals strong confidence from management in the company’s long-term outlook and a commitment to shareholder returns.

These moves suggest that CarMax is positioning itself not just for short-term gains, but for sustained competitive advantage. While the momentum is clearly in the company’s favor, technical indicators suggest $71.40 as a critical breakout level to watch, while any drop below $69.00 may signal near-term weakness. Still, the current results and capital allocation strategy reflect a company firing on multiple cylinders—improving profitability, enhancing shareholder value, and executing well amidst broader macro pressures.

With rising unit economics, disciplined cost management, and proactive capital deployment, CarMax appears well-positioned to capitalize on a recovering auto market. The recent earnings beat, coupled with forward-looking strategic execution, makes a compelling case for both momentum and value-oriented investors.

Previously, we covered a bullish thesis on Carvana Co. (CVNA) by Investing City in May 2025, which highlighted the company’s vertically integrated model, proprietary logistics network, and financing capabilities. The company’s stock price has depreciated by approximately 4.3% since our coverage. This is because the thesis didn’t play out as expected. The thesis still stands as profitability efforts remain underway. Stock Region shares a similar view but emphasizes CarMax’s strong execution and shareholder returns.

KMX isn't on our list of the 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the risk and potential of KMX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.