Summary
- CarMax recently reported better than expected results and the stock saw a good upside.
- However, the real story for the company is its omnichannel roll-out.
- The company posted double-digit comp sales growth in Atlanta market where it launched its first omnichannel initiative.
- This is much better than my as well as management expectations.
- If the company is able to replicate its success in other markets, the stock can see a significant re-rating and its P/E multiple can expand to mid-20s (where it was trading in 2015).
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CarMax(KMX) recently reported better than expected earnings and the stock saw a good jump. However, if you are an investor closely following CarMax story, I am sure you understand that it is not about the quarterly numbers anymore and we are about to see a significant inflection point for the company in 2019 as it rolls out its nationwide omnichannel initiative. As discussed in my previous article, management anticipates having omnichannel experience available to the majority of its customers by February 2020 (which it reiterated on the latest earnings call). In my previous article, I calculated that if the company is half as effective as Carvana (CVNA) in gaining market share from the omnichannel initiative, it can see an additional 5.5% growth per annum.
