Shares of CarMax (KMX 1.79%) fell a whopping 53% in 2025, according to data from S&P Global Market Intelligence. The national used car retailer that helps people easily buy and sell cars is facing a tough market at the moment, with sales declining across the board in 2025. At the same time, competitor Carvana is growing like gangbusters.
Here's why CarMax stock fell in 2025, and whether shares are a buy right now.
NYSE: KMX
Key Data Points
Losing market share to competitive threats
CarMax operates used car lots where individuals and wholesalers can buy and sell vehicles. Using national scale and no-haggle buying and selling, the company pitches itself as a better used car buying or selling process compared to the typical dealership. This has enabled it to gain significant scale in the United States.
In 2025, momentum for the business began to fade. In the third quarter -- which was reported in late December -- CarMax's total revenue fell 7% year-over-year to $5.8 billion. Through the first nine months of this fiscal year, sales were down 2%. It is seeing declining volume, sales, and profit margins, which is a recipe for a stock price disaster.
At the same time, its competitor Carvana is gobbling up market share, posting a 44% increase in units sold last quarter. This is a direct threat to CarMax and should concern shareholders. The Board of Directors was clearly concerned, with CarMax CEO Bill Nash stepping down from his position in early December. This added even more fear for investors.
Image source: Getty Images.
Time to buy the dip?
After falling significantly in 2025, CarMax stock now trades at a price-to-earnings ratio (P/E) of 15, which appears to be a relatively low valuation.
Before any investor buys into the stock, they need to ask whether CarMax will stabilize its market share that it is losing to Carvana. CarMax has a lot of fixed costs, meaning it needs to drive a certain level of unit volume through each of its car lots in order to generate a profit. Margins are moving in the wrong direction with unit volumes declining throughout 2025.
If CarMax can regain its momentum and stabilize its profit margin, the stock is likely to do well from here. But if Carvana and other competitors keep eating its lunch, the stock will likely languish even further.
