Truist Securities has raised its price target on CarMax Inc, the largest US used-car retailer, from $78 to $90 per share, citing an improved sales outlook as consumer demand for pre-owned vehicles shows signs of stabilising. The brokerage maintained a 'hold' rating on the stock, noting that while near-term headwinds persist, the company's recent quarterly performance and inventory management have exceeded expectations.
Analysts at Truist pointed to a gradual recovery in the US used-car market, where prices have moderated after a period of sharp inflation. CarMax reported a smaller-than-expected decline in retail used-unit sales in its latest quarter, supported by easing supply chain bottlenecks and a more favourable financing environment. 'The trajectory of sales is improving, and CarMax is well positioned to capture pent-up demand,' the analysts wrote in a note to clients.
The upgrade comes against a backdrop of broader market uncertainty, with UK investors holding US equities through global funds or direct holdings likely to take note. The S&P 500 edged 0.3% higher on the day, while the FTSE 100 remained flat as traders weighed mixed economic data. CarMax's performance is often seen as a bellwether for consumer spending, particularly in the discretionary sector.
For UK pension holders with exposure to US equities, the news underscores the importance of monitoring North American consumer trends. 'The used-car market is a key indicator of household financial health,' said one London-based analyst. 'If CarMax's outlook is improving, it suggests that consumers are finding their footing, which bodes well for broader retail sentiment.' The analyst cautioned, however, that interest rate decisions by the Federal Reserve remain a wild card.
CarMax shares have gained roughly 12% year-to-date, outperforming the wider retail sector. Truist's revised target implies an upside of approximately 8% from the stock's previous close. Investors will now look ahead to CarMax's full-year results for further confirmation of the recovery trend.
Source: Truist Securities research note