Why CarMax Plunged in September

Core Insights - CarMax shares fell 26.9% in September, significantly underperforming the market [1] - The company reported disappointing earnings, with a revenue decline of 6% to $6.59 billion and a 24.7% drop in earnings per share to $0.64, both missing analyst expectations [3] - Management is implementing cost-cutting measures aiming for $150 million in reductions over the next 18 months and launched a new marketing campaign to enhance competitiveness [4][5] Financial Performance - CarMax's second quarter results showed a revenue decline of 6% to $6.59 billion and earnings per share down 24.7% to $0.64, both figures falling short of expectations [3] - The stock is currently trading at 14 times this year's earnings estimates and 11.8 times next year's expectations, suggesting it may be undervalued [8] Market Environment - The company faces challenges from a declining consumer confidence index, which fell to 94.2 from 97.8, below the expected 96.0 [6] - Economic conditions, including a weakening job market and high inflation, may lead consumers to delay big-ticket purchases like automobiles [7] Strategic Initiatives - Management is optimistic about new initiatives, including cost-cutting and a marketing campaign titled "Wanna Drive?" aimed at improving market position against online competitors [4][5] - Despite the current challenges, CarMax may be viewed as a value stock for investors looking for alternatives to high-tech valuations [10]