Consumer Macro Trends Tipped off Big Gains in CarMax (KMX)

Consumer macro trends matter. For CarMax (KMX) investors, tracking the ripple effects of large-scale supply constraints and the corresponding shifts in consumer behavior has proven to be extremely beneficial. LikeFolio highlighted these ripple effects in our June MegaTrends Report: Chip Shortage Fallout and corresponding Bullish KMX alert. KMX shares have gained by as much as +28% since then, following the company's 22Q1 "blowout" earnings featuring rising auto prices and a hot market for used vehicles. According to our data, the powerful consumer trends that powered this hot used vehicle market continue to hold strong. Used Car Demand mentions are +25% higher vs. 2019 and +4% higher YoY.

And Chip Shortage woes show no signs of normalization. Chip Shortage mentions are at all-time highs, +43% higher on a QoQ basis. Automakers have confirmed the chip shortage will likely linger beyond 2021. Two names rise to the top in Used Vehicle Demand: CarMax and Carvana. Consider consumer happiness levels below, featuring major players in used vehicle sales:

Both CarMax and Carvana have significantly happier customers vs. the digital-first platform, Vroom (VRM). And both platforms are building on strength recorded a year ago, with double-digit YoY gains in total mention volume. While mention volume is growing, as highlighted on the chart below, so are investor expectations.

Looking ahead, we're keeping a close eye on-chip supply constraints and used vehicle demand. Long-term, we like CarMax's and Carvana's positioning in this marketplace. If current macro trends continue their current trajectories, the rising tide can be expected to continue to lift both boats. KMX will report 22Q2 earnings Sept. 30 before the bell.