Investors have mostly ignored the problems facing the car sector. That could be changing, which would have a significant impact on the stock prices of the biggest auto dealers. CarMax (KMX) executives stated last month that as consumers struggle with affordability, demand for used cars is dropping. Shares immediately fell 25%. The sector was then downgraded by Moody’s.
New negative CarMax bets should be considered by aggressive investors. I will explain.
The automobile industry is in transition. In addition to moving away from internal combustion engines and toward electrification, the majority of the leading automakers in the world are still constrained by supply chain bottlenecks. Investors have shown a willingness to see past these difficulties. The wager was that future sales would increase significantly because of pent-up demand and relatively wealthy customers.
According to a Business Wire press release, analysts at J.D. Power and LMC Automotive predicted that retail sales in September would total 958,948 units, an increase of 5.4% over the same month last year. Sales promotions, which are typically offered in September, were not present, according to the researchers. Additionally, transaction prices increased despite rising short-term interest rates, indicating pricing power.
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