JPMorgan is pumping the brakes on shares of CarMax.
JPMorgan is pumping the brakes on shares of CarMax . Analyst Rajat Gupta downgraded the used vehicle stock to underweight from neutral, saying that the risk-reward looks skewed to the downside as the potential for lower earnings revisions linger. "To be clear, we believe KMX is likely to be a long-term share gainer in the used car market and see investments over the last 3 years ultimately bearing fruit," Gupta wrote in a note to clients Wednesday.
CarMax benefitted from an increase in prices and demand for used cars. But that boom seemingly came to a shuttering halt in recent months as consumers faced high inflation, high interest rates, recession fears and a shift in spending patterns. According to Gupta, Wall Street is also failing to accurately account for downside risks to overall earnings. CarMax's auto finance business, in particular, could face rising delinquencies in a downturn and an increase in charge-offs.
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