Should You Buy the Plunge Today in CarMax Stock?

Core Insights - CarMax (KMX) shares dropped 20% following disappointing Q2 financial results, highlighting challenges in the used car market [1] - The company reported earnings of $0.64 per share, significantly below the $1.03 forecasted by analysts, with a 6% year-over-year revenue decline [1] Financial Performance - CarMax's earnings fell short of expectations, indicating retail weakness and pressure on auto finance [3] - The gross profit per retail used unit was $2,216 in Q2, showcasing solid unit margins despite overall financial challenges [4] Strategic Initiatives - Management announced a $150 million cost-cutting initiative to enhance operational efficiency in response to deteriorating financials [3] - The company repurchased $180 million worth of shares in Q2 and plans to continue its aggressive buyback program [4] Digital Transformation and Growth Potential - Approximately 80% of unit sales are now supported by digital capabilities, positioning CarMax well for future growth [5] - The company has a strong balance sheet with a net leverage ratio of 1.5x, providing stability during challenging times [5] Market Sentiment and Valuation - KMX shares are currently trading at 15 times earnings, suggesting potential value for long-term investors [6] - The recent selloff has led to significant risk pricing, with an RSI of 20.24 indicating oversold conditions [6] - Wall Street remains bullish on CarMax stock for the next 12 months, indicating confidence in the company's recovery [8]