Stock Entry Point Article​

Carmax, Inc 2

Investors looking for auto stocks to buy have a challenge on their hands. The auto industry had been struggling with lower demand, a slowdown in China, and the trade war between the US and China. That was before the pandemic hit the world and locked down manufacturing plants. The entire global economy has suffered over the last 6 months.

Amidst the turmoil, the general economic distress has led people to tighten their wallets. Demand for used cars has grown significantly as people opt for cheaper pre-owned vehicles rather than more expensive newer ones. Carmax is the largest used-car dealer in the US and one of the top auto stocks to buy now.

Carmax reported its Q12021 earnings back in June. Its earnings per share fell 98% while revenues were down 40%. During the better part of that quarter, half of Carmax’s stores were closed or under limited operations due to government shelter-in-place orders. However, the company is still a candidate for the best auto stock to buy right now as it took some initiatives to reduce the pandemic-related risks and better position the business. According to Bill Nash, CEO, Carmax, “We also launched new initiatives such as contactless curbside pickup, a temporary extension of our 90-day warranty and cash payment assistance to meet the near-term needs of our customers.”

Carmax is also poised to benefit from a higher average age of used vehicles. With production plant lockdowns and lower new-car purchases, the number of 1 to 3-year old vehicles is expected to go down. Older cars require more conditioning, more complex pricing, and a full-service used-car retailer like Carmax can potentially be one of the best auto stocks of 2020. Carmax stock closed at $106.63 on 18th August 2020, up 14.23% for the past month.


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