Shorts Circle Struggling CarMax Stock

Short interest now accounts for almost 9% of the stock's available float

Nov 7, 2022 at 1:43 PM

CarMax, Inc. (NYSE: KMX) is a used car retailer based in the United States. It engages in the retail of used vehicles and wholesale of vehicle auction operators. The company operates retail, wholesale, and auto financing businesses through more than 230 locations around the United States. At last glance, KMX up 2.4% at $64.29.

Regarding the stock, KMX is down by about 59% in price compared to what it traded at a year ago and has decreased by 60% since peaking at a November 2021, record high of $155.98. The 20-day moving average looks to be moving in as support, however, which may help recover some of the stock's recent losses. CarMax now offers a relatively low valuation at a forward price-earnings ratio of 12.27 and a price-sales ratio of 0.3.

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Furthermore, CarMax holds a balance sheet with $56.77 million in cash and $19.45 billion in total debt on its balance sheet, outweighing its market cap by nearly $10 billion. Overall, KMX’s risks far outweigh its reward potential, making the stock unideal for even value investors at its low price.

Short interest has been moving higher, up 8.8% in the most recent reporting period, and now accounts for nearly 9% of the stock's total available float. At the equity's average pace of daily trading, it would take shorts seven days to buy back their bearish bets.

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