After Carmax Plunges to 52-Week Low — Is Carvana Next to Fall?

Carmax (NYSE:KMX) stock plunged to a 52-week low last week after Q2 earnings missed estimates. The company cited “challenging” conditions due to weak used-car sales and rising loan losses leading to revenue of $6.6 billion against $7 billion expected and earnings of $0.64 per share versus $1.05 forecast. 

Meanwhile, Carvana (NYSE:CVNA) trades only 10% below the all-time high of $413 per share hit in July, up 81% in 2025. The drive higher was in part due to record Q2 sales of 143,000 units, a 41% increase. 

Yet, did the market overreact to KMX’s results and send the stock tumbling, while being overly enthusiastic about CVNA? Or does Carvana face a similar drop in the near future?

KMX’s Earnings Bomb

Carmax’s Q2 saw retail used-car sales drop 5.4% to 200,000 units, with comparable-store sales down 6.3%. Wholesale units fell 2.2%, reducing total vehicle sales 4.1% to 338,000. The year-over-year revenue decline was the first in years.

The primary culprit was high interest rates reducing affordability for KMX’s middle-income customers. Used-car prices dropped 1.6% in wholesale markets, but demand stayed low. Carmax Auto Finance income also fell, with loan-loss provisions rising due to higher delinquencies. 

KMX stock is down 21% since the report, cutting $1.5 billion in market value. Analysts, including Wedbush, downgraded KMX and pointed to issues sourcing older vehicles and omnichannel execution. However, CEO Bill Nash noted the company experienced stable gross profit per unit at $2,216 but projected flat to low-single-digit retail growth for 2026.

CVNA’s Hot Streak Defies the Odds

Carvana’s results were a different story. Q2 retail sales hit 143,000 units, up 41%, with revenue at $4.8 billion and adjusted EBITDA at $601 million, a 12.4% margin. Net income was $308 million, with gross profit per unit at $3,734. 

Its online model targets younger buyers seeking fast purchases. After a near-bankruptcy in 2022, the used car retailer cut costs in reconditioning and in-house transport improved margins. The 2024 acquisition of ADESA auto auction added 76,000 retail units in the second quarter. 

Partnerships, such as the one with Ally Financial (NYSE:ALLY), give it financing heft, while Carvana offers no minimum credit score sales, attracting more buyers. Moreover, electric vehicles and hybrids now represent 9% of sales — up from 2% in 2023 — reflecting market shifts. 

Retail investors have jumped on CVNA stock, driving a 7,690% surge since the beginning of January 2023, but macroeconomic risks remain.

Why KMX Struggles While CVNA Thrives

Carmax, with over 240 stores, faces regional sales drops and serves middle-class buyers affected by high rates. Its omnichannel strategy — online browsing with in-store pickups — aims for flexibility but struggles with inventory sourcing and pricing. AI appraisal investments haven’t offset capital tied to physical lots.

Conversely, Carvana’s online-only model, with home delivery and seven-day returns, appeals to 95% of buyers who research digitally. Lower overhead and in-sourced transport reduce costs. However, it recently acquired two car dealerships as it tests expanding into physical vehicle sales for faster fulfillment, mimicking KMX’s hybrid model and potentially adding risk if it expands. 

CVNA targets younger buyers with cars priced under $20,000 and easy financing, while KMX’s older customers face affordability issues. Industry used-car sales rose 1.7% in Q2, but demand favors digital platforms.

Key Takeaway

Carmax’s results don’t ensure Carvana’s decline. CVNA’s online efficiency and cost controls limit macro impacts. But a used-car demand drop from recession or higher rates could hit CVNA’s 23% sales growth goal for 2025. Retail investors boosted shares after 2022, but fading support could cause a 50% or more drop, while dealership expansions may increase scale but add KMX-like risks. Its customer base also includes a large percentage of subprime borrowers, another potential time bomb that could detonate in a recession. 

Third-quarter sales will be critical: growth will indicate continued strength, but a miss could mirror KMX’s losses. CVNA remains stable for now, but a correction is possible if fundamentals — or the economy — weaken.