CarMax Faces Omni-Channel Uncertainty as Morgan Stanley Cuts Target

CarMax, Inc. (NYSE:KMX) is one of the oversold mid-cap stocks to buy according to hedge funds. On October 1, 2025, Morgan Stanley lowered its price target on CarMax from $80 to $56 while maintaining an Overweight rating.

The firm flagged execution risks tied to CarMax’s omni-channel strategy, noting that its ability to deliver on its digital and physical integration remains uncertain amid intensifying competition. Carvana, in particular, was singled out as having a “competitive moat,” casting a shadow over CarMax’s long-standing market dominance.

Despite the downgrade, Morgan Stanley didn’t issue a bearish call outright: it acknowledged that CarMax still has fundamental strengths, but the path to unlocking them may be more uneven than previously thought.

The stock has been volatile in recent weeks, reflecting investor unease over the used-car market’s normalization and questions around CarMax’s ability to scale its hybrid model without further margin erosion. Analysts are still watching the name closely, suggesting that valuation support could remain if execution improves.

Headquartered in Richmond, Virginia, and founded in 1993,  CarMax, Inc. (NYSE:KMX) is the largest used-vehicle retailer in the U.S., operating over 240 stores and offering a growing online platform that supports its no-haggle, customer-centric sales model.

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