Here's Why You Should Offload CarMax Stock From Your Portfolio

CarMax, Inc. KMX, the largest retailer of used vehicles in the United States, is struggling with declining sales volume, rising marketing spend and high competition.Let’s see why you should consider offloading this Zacks Rank #5 (Strong Sell) stock from your portfolio.Expected Decline in Sales, High Debt Levels to Ail CarMaxService margins were negative in the fiscal third quarter and are under pressure due to softer sales volumes, since service margins worsen when sales slow. The company expects the fiscal fourth-quarter sales performance to be pressured, which may continue to impact its service margin.CarMax’s average selling prices have trended higher and appear less appealing to customers. To remain a preferred option, the company plans to narrow the gap between its pricing and the broader market by reducing margins and backing this strategy with increased marketing spending. The marketing spend on a total unit basis is expected to be up year over year in the fiscal fourth quarter.CarMax’s stretched balance sheet plays a spoilsport. As of Nov. 30, 2025, the company had cash/cash equivalents and long-term debt of $204.9 million and $1.17 billion, respectively. Its long-term debt-to-capital ratio stands at 0.73, higher than the auto sector's 0.18. The elevated leverage makes it difficult for the firm to tap growth opportunities and restricts the financial flexibility. The company’s times interest earned ratio of 6.8 is lower than the auto sector’s 25.24.Automotive retail is highly competitive and fragmented. CarMax faces competition from traditional dealers, online platforms and private sellers, all offering similar vehicles at similar prices. Franchised new car dealers may have an edge with certified pre-owned programs. The rise of online car buying and well-funded e-commerce entrants with larger inventories and better digital experiences could pressure KMX’s margins and business model. Failing to respond effectively may significantly impact the company’s sales and operations.Stocks to ConsiderSome better-ranked stocks in the auto space are General Motors Company GM, OPENLANE, Inc. OPLN and REV Group, Inc. REVG, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for GM’s 2025 and 2026 EPS has improved 8 cents and 47 cents, respectively, in the past 30 days.The Zacks Consensus Estimate for OPLN’s 2025 sales and earnings implies year-over-year growth of 9.4% and 48.2%, respectively. EPS estimates for 2025 have improved 9 cents in the past 60 days. The same for 2026 has improved 2 cents in the past 30 days.The Zacks Consensus Estimate for REVG’s fiscal 2026 sales and earnings implies year-over-year growth of 8.1% and 37.8%, respectively. EPS estimates for fiscal 2026 and 2027 have improved 20 cents and 26 cents, respectively, in the past 30 days.Zacks Naming Top 10 Stocks for 2026Want to be tipped off early to our 10 top picks for the entirety of 2026? History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2025, the Zacks Top 10 Stocks gained +2,530.8%, more than QUADRUPLING the S&P 500’s +570.3%.Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2026. Don’t miss your chance to get in on these stocks when they’re released on January 5. Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report General Motors Company (GM): Free Stock Analysis Report CarMax, Inc. (KMX): Free Stock Analysis Report REV Group, Inc. (REVG): Free Stock Analysis Report OPENLANE, Inc. (OPLN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks