CarMax's (NYSE: KMX) latest results suggest its turnaround strategy is gaining traction. Its Shift into GEAR strategy is built around four pillars: Great Offering, Easy Experience, Add Value on Each Transaction and Run Lean. Together, they focus on improving pricing and inventory, simplifying the customer experience, increasing transaction profitability and reducing operating costs. The planned resumption of share buybacks this quarter is an important signal that management believes those improvements are durable. How much CarMax buys back remains unclear, but the move adds to the evidence that the company has turned a corner, is on track to sustain improvement, and can drive a full stock price recovery over time.
The potential stock price recovery is substantial if CarMax can sustain the recent improvement. CarMax trades more than 50% below its existing highs, setting the stage for more than 100% upside over time. The recovery will not happen quickly or in a straight line, so investors should expect volatility and periodic corrections, with resistance targets near $62 and $87.
