CNBC’s Jim Cramer told investors on Thursday that used-car dealer CarMax’s recent earnings decline is good news for the Federal Reserve’s drive to curb inflation.
“If you look at CarMax this quarter, it tells you that the Fed has been incredibly successful at undermining consumer confidence,” he said. “[Fed Chair] Jay Powell doesn’t want people to spend their money on expensive items.”
CarMax missed earnings estimates by 43% in its fiscal second-quarter results released Thursday, citing macroeconomic issues like inflation and rising interest rates.
Carmax shares plunged nearly 25% to hit a new 52-week low. The stock also dragged shares of other used-car dealerships lower, including Carvana and AutoNation, which fell 20% and 10%, respectively.
According to Cramer, one factor showing the downturn in the used car market is a drop in vehicle prices.
The Manheim used-car value index, an indicator of price developments, has fallen steadily this year, although each month’s value was higher than last year due to previous price increases. However, it is likely that prices will fall year-on-year over the next month, he said.
“This is real progress in the fight against inflation,” Cramer said.
He added that while some investors tried to get to the bottom of the used car market before CarMax reported its quarter, they should have known better than to do so in the current inflationary environment.
“Used car stocks looked cheap, but that was a trap because in this environment they just can’t deliver on Wall Street’s earnings estimates,” he said.
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