Carmax Inc, a used car retailer, is facing tough competition from companies like AutoNation Inc and Carvana Co, according to Landon Swan, co-founder of LikeFolio. The company’s stock has dropped by around 20% in the last three months. Carmax reported $7.1 billion in revenue for its first financial quarter, falling short of Street estimates by about $50 million. The company also experienced a significant year-over-year impact on its quarterly EPS at 97 cents per share.

Speaking with Schwab Network, Landon Swan mentioned that Carmax is facing lower lease volumes, indicating a decrease in supply. This results in fewer cars to buy and sell, leading to higher prices. Despite having a high customer satisfaction rate of 69%, Swan suggested not owning Carmax shares as the company struggles to expand its market share and become a leader in the industry. Additionally, Carmax’s recent delay in achieving its goal of selling 2 million cars annually by 2030 raises concerns about its growth potential.

Swan’s perspective on Carmax differs from Wall Street, which currently rates the company as «overweight». The company’s lag in the e-commerce sector compared to AutoNation and Carvana, coupled with challenges in the used car business, contributes to Swan’s reservations about Carmax’s performance. Factors like software updates and macroeconomic conditions influencing people to keep their cars longer also negatively impact Carmax.

In the first quarter, Carmax spent $104 million repurchasing 1.4 million common shares, with $2.26 billion remaining for future repurchases. CEO Bill Nash announced plans for a non-preferential asset-backed securitization deal in the second quarter to support financial revenue growth. It’s worth noting that Carmax’s stock reached over $150 during the pandemic but has since declined.

Overall, Carmax faces obstacles in the competitive automotive market, with challenges in supply, market expansion, and e-commerce. While Wall Street remains optimistic about the company’s prospects, Landon Swan’s insights highlight areas where Carmax needs to improve to regain its position as a market leader.