Needham initiates coverage on Karooooo stock with Buy rating

Investing.com - Needham initiated coverage on Karooooo Ltd. (NASDAQ:KARO) with a Buy rating and a price target of $60.00 on Tuesday. The stock, which has delivered an impressive 54% return over the past year, is currently trading near its InvestingPro Fair Value. Analyst targets range from $52.73 to $58.66, with the company maintaining a robust 70% gross profit margin.

The research firm cited Karooooo’s vertically integrated telematics solution as a superior product and business strategy that drives customer satisfaction and market share gains.

Needham highlighted the company’s impressive 95% commercial customer retention rate, attributing this success to Karooooo’s control over the entire process from installation to customer service throughout the lifecycle.

The firm noted that despite the highly competitive telematics space, Karooooo’s Cartrack platform delivers increasing value to customers through continuous innovation while maintaining stable pricing.

Needham expressed confidence in its subscriber growth estimates for Karooooo over the next two fiscal years, pointing to low market penetration in key emerging markets where the company operates.

In other recent news, Karooooo Ltd. reported significant developments that are capturing investor attention. Raymond (NSE:RYMD) James raised its price target for Karooooo to $58 from $51, following the company’s fourth fiscal quarter results for 2025, which revealed a 3% revenue upside and a 17% year-over-year increase in net new subscriber additions. This positive outlook is further supported by an anticipated 18% organic subscription growth for fiscal year 2026. Meanwhile, Morgan Stanley (NYSE:MS) also adjusted its price target for Karooooo, increasing it to $53 from $43, citing revised revenue and earnings estimates for fiscal years 2026 and 2027. The firm highlighted improvements in average revenue per user due to advancements in camera and video technology as key factors for the adjustment.

Additionally, Karooooo’s CEO, Isaias (Zak) Jose Calisto, announced a secondary public offering of 1.5 million shares priced at $50 each, expected to generate approximately $75 million in gross proceeds. The offering, managed by UBS Investment Bank, William Blair, and Standard Bank, among others, will not provide proceeds to Karooooo but will influence the company’s shareholding structure. Post-offering, Calisto will retain a 58% ownership, potentially decreasing to 57.27% if the option to purchase additional shares is exercised. These recent developments, including analyst upgrades and the secondary offering, underscore the dynamic environment surrounding Karooooo’s market activities.

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