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On Friday, JPMorgan analyst Jash Patwa adjusted the price target for Copart (NASDAQ:CPRT) shares, reducing it to $55.00 from the previous $60.00, while maintaining a Neutral rating on the stock. Currently trading at $53.67 with a market capitalization of $51.85 billion, Copart has seen its stock decline nearly 16% in the past week. The revision follows Copart’s reported insurance unit volume growth, which has raised concerns about the company’s growth trajectory. InvestingPro data reveals that 5 analysts have recently revised their earnings estimates downward for the upcoming period, with analyst targets ranging from $55 to $66.
Copart’s U.S. insurance volume growth showed a year-over-year decline of 1% (2% decline excluding catastrophe-related units), which was a key issue leading into the company’s recent financial results. Despite these challenges, the company maintains strong financial health with a current ratio of 8.16 and more cash than debt on its balance sheet. This performance contrasted with the robust organic volume growth trends of its peer IAA, a subsidiary of RBA, which did not include the impact of catastrophe events and the loss of a contract with USAA. For deeper insights into Copart’s financial health and competitive position, InvestingPro subscribers have access to over 30 additional financial metrics and analysis tools.
In the third fiscal quarter of 2025, ending in April, Copart’s U.S. insurance unit volumes were flat compared to the previous year, while IAA reported a 7% year-over-year increase in overall volumes for the first quarter of 2025, ending in March. This marks the second consecutive quarter where Copart’s organic growth has underperformed relative to IAA.
The divergence in year-over-year growth trends between Copart and IAA has been partly attributed to a contract win by IAA in the second quarter of 2024, which accounts for approximately 40,000 annualized units. This could explain a growth divergence of around 3 percentage points in favor of IAA. Additionally, shifts in insurance carrier market share dynamics have been noted, with Progressive (primarily IAA-dependent) gaining shares at the expense of GEICO (primarily CPRT-dependent).
Moreover, Copart’s management has observed a decrease in U.S. inventory units by 11% year-over-year at the end of the third fiscal quarter of 2025, which could further pressure unit growth expectations. While revenue growth remains positive at 10.21%, the company trades at a relatively high P/E ratio of 40.17, suggesting premium valuation levels. The decline in inventory has been linked to lower assignments, faster cycle times, and a reduced contribution from low-value units, which are less profitable. InvestingPro subscribers can access the comprehensive Pro Research Report for detailed valuation analysis and growth projections.
In an unexpected turn, Copart also cited cyclical headwinds, such as an increase in uninsured and underinsured motorists, as contributing factors to the softness in industry volumes and assignments. This is despite previous expectations that uninsured accident-involved vehicles would not have a material impact, as they would ultimately be processed through Copart auctions.
In other recent news, Copart reported first-quarter 2025 earnings per share (EPS) of $0.42, aligning with analyst forecasts. However, the company’s revenue was slightly below expectations, coming in at $1.21 billion against a forecast of $1.23 billion. Despite the revenue miss, Copart’s global service revenue saw a 9% increase, with U.S. and international service revenues growing by 8% and 18%, respectively. The company maintains a strong liquidity position with over $5.6 billion, including $4.4 billion in cash. CFRA analyst Garrett Nelson upgraded Copart’s stock rating to Strong Buy, setting a price target of $70.00, highlighting the company’s growing net cash balance as a positive indicator for future value creation. Nelson also noted the record average age of vehicles in the U.S., suggesting it could benefit Copart. The company’s gross margin was reported at 46%, with a global gross profit of $552 million, a 5% increase. Copart continues to prepare for an active storm season and invests in physical storage and technology platforms, as stated by CEO Jeff Liao.
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