CarMax Stock Crumbling Before Company Earnings

The stock has a dismal post-earnings history

Deputy Editor
Dec 20, 2021 at 2:22 PM
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CarMax Inc (NYSE:KMX) is one of the handful of companies announcing earnings this week, with its third-quarter earnings report due out before the open on Wednesday, Dec. 22. Analysts are expecting profits of $1.44 per share, and the options pits are pricing in a 13.5% post-earnings swing for KMX -- outpacing the average post-earnings move of 7.7% from the last two years.

Looking back, the stock has a dismal post-earnings history. The stock finished higher after only one of its last eight next-day sessions -- a 6.7% gain this past June. And just this past September, CarMax stock followed its report with a 12.6% drop.  

Following KMX's Nov. 8 record high of $155.97, the stock struggled with pressure at the $150 region, before falling below familiar support at the $140 level last week, and below the $135 level today. At last check, the equity was down 4.4% to trade at $131.47, and breaching long-term support at its 200-day moving average. 

KMX Dec20

The majority of analysts are bullish on CarMax stock. Of the 12 in coverage, nine carry a "buy" or better rating, and three recommend a tepid "hold." Plus, the 12-month consensus price-target of $152.92 is a 16.3% premium to current levels. 

On the other hand, options traders have been much more pessimistic than usual. This is per KMX's 10-day put/call volume ratio of 3.76 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 96% of readings from the past year. 

This bearish sentiment is echoed in today's options activity, where 2,802 puts have crossed the tape so far, in comparison to 1,906 calls. Options volume is running at double what's typically seen at this point, with the weekly 12/23 85-strike put seeing the most activity. Plus, new positions are being opened at the 105-strike put in that same weekly series.


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