Government guidelines regarding shelter-in-place and regional lockdowns have had a negative impact on the auto industry. Auto production plants were shut down, production schedules were disrupted, and retailers could also not operate as they would prior to the pandemic. Amidst the evolving pandemic situation, auto and truck dealership stocks have had a challenging few months.
However, things now seem to be looking up for used-car businesses. Carmax, the largest used car retailer in America, reported analyst beating earnings. The halt in production plants has meant a lesser supply of new cars. Additionally, the general financial distress due to the economic downturn has led people to cut back on purchasing more expensive new and luxurious vehicles and instead opt for lower-priced used cars.
Carmax’s ability to adapt makes it one of the best auto related stocks
Carmax has been working over the past few years on sprucing up its online offerings and better integrating online with offline. This has become critical during the pandemic as people want options to be able to buy cars from their homes and without contact with dealership staff. During the Q220201 earnings call, CEO Bill Nash said, “Our omnichannel experience is built to provide a personalized multichannel experience that empowers customers to buy a car on their terms. It is designed as a world-class in-store experience, a world-class online experience and a seamless integration of the two, giving us the largest addressable market within the used car industry. No other used car retailer is in the position to deliver this iconic customer experience the way we can.”
Carmax is also restarting its share repurchase program
The uptick in Carmax’s performance isn’t a one-off. The company seems to feel confident about its prospects and is, therefore, restarting its share repurchase program. This program was temporarily suspended in April 2020 due to the uncertainty surrounding the demand for used cars and the trajectory of the pandemic. The Carmax board’s buyback authorization still has $1.51 billion of repurchase remaining. If you are looking for auto related stocks to buy, then Carmax is certainly one option to consider.