CarMax Shares Plunged: What You Need to Know (AN, KMX, PAG)

CarMax Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of used-car dealership chain CarMax (NYSE: KMX ) sank 11% in early Thursday trading after its quarterly results came in below Wall Street expectations.

So what: While CarMax didn't whiff too badly on its second-quarter earnings ($0.49 per share versus the consensus of $0.51 per share), investors are naturally taking it as a sign of even more bad things to come. With so much exposure to the bruised consumer, it's no surprise that CarMax shares are hitting a new 52-week low on the news.

Now what: I'd cautiously look into this pullback as possible entry point. While the economic slowdown will continue to weigh on sales, the stock's forward P/E of 12 suggests that plenty of the bad news is already baked in. After all, thanks to its scale and network advantages, CarMax should at least see plenty of market-share gains against rivals like Auto Nation (NYSE: AN ) and Penske Automotive (NYSE: PAG ) in almost any macro environment.

Interested in more info on CarMax? Add it to your watchlist.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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