CarMax Stock Moves Lower on Wedbush Downgrade

More bear notes could be on the equity's horizon

Digital Content Manager
May 19, 2021 at 10:11 AM
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The shares of car retailer CarMax, Inc (NYSE:KMX) are down 3.9% to trade at $115.52 this morning, after the stock received a downgrade at Wedbush to "neutral" from "outperform," as well as a price-target cut to $130 from $155. The brokerage firm noted the security's price run-up in the last year, decelerating trends, and toughening comparisons in May.

On the charts, a number of bear gaps have knocked CarMax stock off a May 5 record high of $138.77. The security has also lost the support of the 60-day moving average, with today's drop has placing it further below the $117 level, which contained its last pullback. Longer term, though, the equity still carries a 52.2% year-over-year lead.

Analysts were optimistic towards the security coming into today, with eight of the 11 in question carrying a "buy" or better rating, while three said "hold" or worse. Plus, the 12-month consensus price target of $140.60 is a 17% premium to its current perch. In other words, more price target-cuts and/or downgrades could be on CarMax sock's horizon.

A shift in the options pits would create additional headwinds for the security. This is per the stock's 50-day call/put volume ratio of 2.29 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits  in the 98th percentile of its annual range, indicating long calls are being picked up at a quicker-than-usual clip. 

Lastly, CarMax stocks sports attractively priced premiums at the moment. The security's Schaeffer's Volatility Index (SVI) of 30% sits in the extremely low 8th percentile of the past 12 months, indicating option players are pricing in low volatility expectations.

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