Morgan Stanley reiterates a bullish view on CarMax (NYSE:KMX). The firm sees the stock as a quality name even though the auto credit/used car environment is getting harder.
Analyst Adam Jonas and team point out that KMX management has executed exceptionally during the long term to take advantage of an extremely strong macro environment.
"In FY23, we expect continued elevated spend in SG&A across: hiring workers, logistics, building out tech and website capabilities. We do expect revenue momentum to slow down, coming off a strong base in FY22 driven by the changing macro environment. Nonetheless, we are still bullish on KMX's omni channel strategy and believe it has the network capability and infrastructure to leverage and become a successful platform for both online and in-store used car purchases."
Morgan Stanley reiterates an Overweight rating on KMX on the expectation that it will continue to compound over the long-term and the firm sees KMX as a formidable competitor to CVNA without the current idiosyncratic risks.
Morgan Stanley assigned a price target of $140 to KMX to rep more than 50% upside potential. Shares of KMX are down 28% year-to-date.