Carmax Inc.'s disappointing first-quarter earnings will "reset" investors' expectations for the used car retailer, an analyst said Thursday, and raised the stock to "Market Perform" from "Underperform."
Wachovia Capital Markets analyst Richard M. Kwas said shares of Carmax have nearly bottomed out after plunging more than 10 percent on Wednesday, when the company said its quarterly profit fell 55 percent and suspended its fiscal-year guidance.
"Value investors will increasingly look past fiscal 2009 and evaluate the stock on fiscal 2010 (and) 2011 prospects, in our view," Kwas wrote in a note to investors.
The Richmond, Va., company will continue to face challenges from the used car industry and the broader economy over the next six to nine months, he said, particularly as it tries to rid itself of an overflow of trucks and SUVs.
But Carmax is aggressively cutting its prices on those automobiles, and shifting its emphasis to passenger cars is a "proactive move," he said.
A Carmax representative could not immediately be reached for comment early Thursday.
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