Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Bottom-Up

<ul><li>CarMax’s stock has been on a downward trajectory since the last quarterly result which had been a major disappointment.</li><li>In response to consumer demand and the current environment, CarMax continued to offer a higher mix of lower-priced vehicles.</li><li>We provide the stock of CarMax a ‘Hold’ rating with a revision in the target price.</li></ul>

CarMax’s stock has been on a downward trajectory since the last quarterly result which had been a major disappointment.In response to consumer demand and the current environment, CarMax continued to offer a higher mix of lower-priced vehicles.We provide the stock of CarMax a ‘Hold’ rating with a revision in the target price.

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Thematic (Sector/Industry)

<ul><li>In just a few weeks, we will be in the thick of the third quarter earnings season which will steal the spotlight, at least temporarily, from global macro developments. </li><li>There appears to be mounting evidence from downside earnings surprises from Nike, FedEx, and CarMax that the consumer and economic pullback is now showing up in the financial reporting of companies quarterly profits and margins. </li><li>The global economic slowdown and inflation impacts are eroding margins and causing retailers like Nike to experience significant inventory builds which will require price cuts to clear the inventory (while good news for inflation). </li></ul>

In just a few weeks, we will be in the thick of the third quarter earnings season which will steal the spotlight, at least temporarily, from global macro developments. There appears to be mounting evidence from downside earnings surprises from Nike, FedEx, and CarMax that the consumer and economic pullback is now showing up in the financial reporting of companies quarterly profits and margins. The global economic slowdown and inflation impacts are eroding margins and causing retailers like Nike to experience significant inventory builds which will require price cuts to clear the inventory (while good news for inflation). 

<ul><li>CarMax had a decent start to the 2023 fiscal and generated total sales of $9.3 billion in the first quarter, up 21% from the previous year's period.</li><li>Total unit sales in their retail division fell by 11% in the first quarter, and used unit comps dropped by 12.7% from the same period in 2017.</li><li>The same broad macroeconomic factors that contributed to a market-wide decline in used car sales during the quarter drove CarMax's performance.</li></ul>

CarMax had a decent start to the 2023 fiscal and generated total sales of $9.3 billion in the first quarter, up 21% from the previous year's period.Total unit sales in their retail division fell by 11% in the first quarter, and used unit comps dropped by 12.7% from the same period in 2017.The same broad macroeconomic factors that contributed to a market-wide decline in used car sales during the quarter drove CarMax's performance.

Equity Capital Markets

<ul><li>CarMax’s 2021 results reflected significant growth in earnings, market share, and sales and the company has shown robust progress on its strategic initiatives.</li><li>The retail market share growth is highest as the company focuses on delivering a maximum customer-centric experience in the auto industry.</li><li>We believe that the company is well-positioned to grow in market share and we maintain our ‘Hold’ Rating.</li></ul>

CarMax’s 2021 results reflected significant growth in earnings, market share, and sales and the company has shown robust progress on its strategic initiatives.The retail market share growth is highest as the company focuses on delivering a maximum customer-centric experience in the auto industry.We believe that the company is well-positioned to grow in market share and we maintain our ‘Hold’ Rating.

CarMax Inc.: Overview of Business Strategy

<ul>
<li>Auto dealer, CarMax Inc. has benefitted heavily from the positive trends in the used car industry.</li>
<li>The high level of pricing and supply shortage of new cars coupled with the stimulus package are the reasons behind increased consumer spending on used vehicles.</li>
<li>CarMax is milking this used car demand and also launched an e-commerce portal for online car shopping.</li>
</ul>


Auto dealer, CarMax Inc. has benefitted heavily from the positive trends in the used car industry.
The high level of pricing and supply shortage of new cars coupled with the stimulus package are the reasons behind increased consumer spending on used vehicles.
CarMax is milking this used car demand and also launched an e-commerce portal for online car shopping.


United States

Dick's Sporting Goods, Inc. operates as a sporting goods retailer that manages stores primarily in the eastern and central United States. The Company owns stores that offers a broad selection of brand name sporting goods equipment, apparel, and footwear.

Burlington Stores, Inc. owns and operates clothing retail stores. The Company offers, through its stores and internet sites, men's, women's, and children's apparel. Burlington Holding operates within the United States and Puerto Rico.

Abercrombie & Fitch Co.  a specialty retailer that operates stores and direct-to-consumer operations. Through these channels, the Company sells: casual sportswear apparel, including knit and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, and outerwear; personal care products; and accessories for men, women and kids.

Murphy USA Inc. produces and distributes petroleum products. The Company engages in refining, marketing, and transportation of oil and gas products. Murphy USA provides products and services worldwide.

The Gap, Inc., is an international specialty retailer operating retail and outlet stores.  The Company sells casual apparel, accessories and personal care products for men, women, and children. The Gap operates stores in the United States, Canada, the United Kingdom, France, Ireland, and Japan.

Ulta Beauty, Inc. operates a chain of beauty stores. The Company offers cosmetics, fragrance, skin, and hair care products, as well as salon services. Ulta Beauty serves customers throughout the United States.

Lithia Motors, Inc. retails, finances, and services new and used vehicles. The Company also provides other related services and products, such as the sale of parts and accessories, extended service contracts, aftermarket automotive products, and collision repair services. Lithia Motors operates throughout the United States.

Williams-Sonoma, Inc. retails cooking and serving equipment, home furnishings, and home accessories through retail stores, mail order catalogs and e-commerce. The Company offers its merchandise under the Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, and West Elm.

GameStop Corporation operates specialty electronic game and PC entertainment software stores throughout the United States, Australia, Canada and Europe. The Company stores sell new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise.

Penske Automotive Group, Inc. operates franchised automobile dealerships. The Company's franchises are located throughout the United States, Puerto Rico and the United Kingdom.  Penske Automotive sells new and used vehicles as well as offers maintenance and repair services on all brands it represents.

Chow Tai Fook Jewellery Group Limited retails jewelry.  The Company sells rings, necklaces, earrings, pendants, bracelets, and small statues.  Chow Tai Fook Jewellery operates retail stores in China, Hong Kong, Macau, Taiwan, Malaysia, and Singapore.

HIKARI TSUSHIN, INC. is a mobile telecommunication service subscription agency. The Company also operates telecommunication services stores, HIT SHOP, which sell cellular telephones, and related goods.  Hikari Tsushin also sells office automation equipment and insurance.

L'Occitane International S.A. is a global, natural and organic ingredient based cosmetics and well-being products enterprise.  The Company designs, manufactures and markets a wide range of cosmetics and well-being products based on natural and organic ingredients sourced principally from or near Provence.

Hotai Motor Company Ltd. operates as an automobile dealership. The Company sells and services new and used cars and trucks in Taiwan.

Nitori Holdings Co., Ltd., is based in Hokkaido and operates a furniture retail chain.  The Company sells living room furniture, storage furniture, dining furniture, office furniture, beds, and interior goods.  Nitori Holdings also sells original brand merchandise and imported merchandise.

Zalando SE provides online sale of fashion accessories. The Company offers clothing, sports products, shoes, bags, and other accessories for men, women, and children. Zalando markets its products worldwide.

JD Sports Fashion PLC operates a chain of retail stores which sell brand-name sports and leisure wear. The Company sells sports and leisure footwear, clothing, and accessories, among other items. JD Sports Fashion serves customers in the United Kingdom.

Kingfisher plc operates as a home improvement company. The Company offers hardware, home decoration, building materials, and garden products. Kingfisher markets its products worldwide.

Dufry AG operates duty-free shops in countries such as Tunisia, Italy, Mexico, France, Russia, the United Arab Emirates, Singapore, the Caribbean and the United States.

CarMax, Inc. sells at retail used cars and light trucks. The Company purchases, reconditions, and sells used vehicles in its superstores and franchises throughout the United States.

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Carmax Inc (KMX US)

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CarMax Inc. - Investment Thesis

Auto dealer, CarMax Inc. has benefitted heavily from the positive trends in the used car industry. The high level of pricing and supply shortage...

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