CarMax received a double upgrade to Buy from Underperform, while its price target was raised to $65 from $50.
The change follows federal pressure on dealers to advertise the actual amount a consumer can pay. Mandatory dealer fees must be included in the advertised price, while only charges that the government requires consumers to pay directly may be excluded.
That shift could reduce an advantage for dealers whose advertised prices appeared lower because they excluded mandatory charges. The analysts said CarMax may be able to invest further in pricing to increase unit volumes while keeping gross profit per vehicle stable through cost initiatives.
CarMax’s latest quarterly results showed higher sales alongside lower vehicle-level margins.
The analysts also pointed to demand from higher-income consumers moving into used vehicles as new-car affordability remains strained. Sales to lower-income households were described as stable, so the shift among higher-income buyers was adding volume rather than replacing existing demand. The upgrade reflects the view that transparent pricing and CarMax’s own pricing and cost actions could support further sales gains, although the company is accepting lower profit per vehicle as it competes more aggressively.