CarMax stock plunges after earnings missed expectations

CarMax (KMX.US) stock is dropping more than 11% today after the Virginia-based used auto retailer posted mixed quarterly results. Company earned $1.72 per share, while analysts' expected earnings of $1.90 per share. On the other hand, revenue beat Wall Street projections. CarMax reported total revenues of $7.99 billion resulting in a 49% jump compared to the same period a year ago and well above market expectations of $6.91 billion. However comparable pre-owned car sales increased only 6.2%,  below market expectations of 7.3% increase. 

Used car prices in the US have risen this year after customers initially put off their purchases in 2020 amid the outbreak of the pandemic. The prices of new cars soared due to the chip shortages, which in turn resulted in an increased demand for used cars, prices of which were more affordable for ordinary citizens. However, some analysts now believe that demand has already been largely met because people who have had to buy a car have likely done so in recent months. Other customers probably prefer to wait for better offers to appear.

CarMax (KMX.US) stock launched today's session with a massive bearish price gap and broke below the 50 SMA (red line). Currently the price is testing an upward trendline. Should a break lower occur, then downward correction may deepen towards support at $121.75 which is marked with the lower limit of the 1:1 structure, 200 SMA (red line) and 23.6% Fibonacci retracement of the upward wave launched in March 2020. On the other hand, if buyers manage to halt declines here, then another upward impulse towards all-time high at $148.00 may be launched. Source: xStation5