12:51 PM EDT, 10/16/2024 (MT Newswires) -- CarMax ( KMX ) is well-positioned to gain market share "in an accelerating used car market in 2025" due to effective sourcing, a strong value proposition, a focus on late-model vehicles, and expanding first-party lending, Wedbush Securities said in a Wednesday note.

The company will need to navigate market volatility and rising interest rates to meet its near-term sales goals while short-term challenges include election noise and interest fluctuations, Wedbush added.

The firm said that the CarMax Auto Finance division is seeing improvements in delinquency trends, particularly with recent loan vintages. However, the company must reassure investors that it is adequately reserved despite increasing loss rates.

"The portfolio-level delinquency rate decreased 18 basis points sequentially... but the cumulative loss rate increased 8 bps," the firm said.

Wedbush said that the rising extension rate and aging of the loan portfolio are contributing to higher loss rates, while delinquency trends are improving, the underlying financial health of some loans remains fragile.

The brokerage has a outperform rating on CarMax's ( KMX ) stock with a $95 price target.

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