CarMax Profiting from Analyst

CarMax saw a jump in their stock on Monday after a Goldman Sachs analyst said that the company is doing well. Matthew J. Fassler said that he thought the “company’s overall exposure to the subprime market” was truly minimal and that the number of delinquencies is slowing and probably leveling off.

After the announcement, the stock went up 5.8% on the NYSE, which is more than double normal trading volume. Most stocks have been falling somewhat with the subprime, so CarMax was excited to see that they were rebounding after the comments. With the housing boom being what it was, and borrowers missing payments, financial lenders cutting off their customers, it was a bright spot in an otherwise downfallen day for most lenders.

As CarMax truly offers little business to subprime customers that are planning on using other ways of financing, and they offer no credit to subprime customers at all, it was no wonder that they would do well with such little risk. Fassler said that he thought that the company would only start having problems if subprime started reaching into other areas of the financial markets, such as credit cards and auto loans, but for now they seem to be fairly insulated from such problems.

He said that they are showing great stability, and that CarMax has actually reported a 14% profit during their third quarter in their car loans. They are showing a profit of $32 million, because of an increase in the number of car loans as well as the amount of money being lent.

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