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Why CarMax Stock Crashed on Thursday

By Joe Tenebruso - Updated Mar 13, 2020 at 9:25AM

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Car-buying and COVID-19 aren’t a good match.

What happened

Shares of CarMax (KMX 7.19%) declined by more than 10% on Thursday, as investors grew increasingly concerned that the uncertainty surrounding the COVID-19 coronavirus pandemic would make people delay their vehicle purchases.

So what

COVID-19, the disease caused by the novel coronavirus, is scary. The outbreak has spread to nearly all corners of the world, infecting more than 127,000 people and killing over 4,700. 

Panic has taken hold of investors, and financial markets around the globe have suffered staggering losses in recent days. Many stocks have already shed more than a quarter of their value, and more losses may be ahead.

Worse still, the measures that countries are taking to slow the spread of the disease might lead to a sharp downturn in the global economy, further denting businesses' profits and peoples' livelihood in the process.

A man with his head down on a table in front of a chart that rises then falls sharply.

Image source: Getty Images.

Now what

Considering this frightening backdrop, it's easy to see why many people might choose to hold off on making major purchases. If they can wait to buy a new car, they likely will, particularly since many will be traveling far less often due to coronavirus-related school and business closures. This could dent CarMax sales and profits in the coming quarters, and it appears that many investors have chosen to sell their shares now rather than to endure that pain.

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Stocks Mentioned

CarMax Inc. Stock Quote
CarMax Inc.
KMX
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