Copart, Inc. CPRT holds online auctions for salvage and clean-title vehicles. It also offers a wide range of remarketing services. The company is currently struggling with rising operating expenses and strong competition.
Let’s see why you should consider offloading this Zacks Rank #4 (Sell) stock from your portfolio.
High Operating Cost, Strong Competition Hurt CPRT
Copart’s operating costs have been on the rise for several quarters, amid increasing G&A expenditures. In the last reported quarter, G&A spend reached $92.3 million, up 1.4% year over year. These costs are expected to keep rising as the company continues to invest in sales, marketing, technology and operations, which may weigh on near-term margins.
There is a downside to technological advancement. While it is currently a driving factor for the salvage auto auction industry, high repair costs for superior parts are resulting in increased total loss frequency by insurers. However, as safety technology and driverless technology improve over the years, there may be a downward trend in the frequency of collisions. This could adversely impact Copart’s inventory levels, which, in turn, will hamper revenue growth.
A small group of vehicle sellers has historically provided a significant share of Copart’s revenue, even though no single seller contributed more than 10% in fiscal 2023–2025. Past terminations of seller agreements have reduced revenue in affected markets, and there is no guarantee that current agreements will continue or that new ones will be secured. Any loss of a major seller, unfavorable changes in terms, or inability to grow the company’s vehicle supply could materially harm its results, financial position and future revenue growth.
The company faces strong competition from remarketers of salvage and non-salvage vehicles for contracts, supply agreements and storage facilities. Key competitors include vehicle auctioneers, like Ritchie Bros. (and subsidiary Insurance Auto Auctions), Carvana, Openlane, Manheim and ACV Auctions, as well as dismantlers like LKQ Corporation. LKQ and groups such as the American Recycling Association often bypass remarketers by purchasing directly from insurers. Internationally, competitors include auction companies, dismantlers and independent remarketers.
Stocks to Consider
Some better-ranked stocks in the auto space are General Motors Company GM, OPENLANE, Inc. KAR and Garrett Motion Inc. GTX, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GM’s 2025 and 2026 EPS has improved 21 cents and 38 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for KAR’s 2025 sales and earnings implies year-over-year growth of 9.4% and 48.2%, respectively. EPS estimates for 2025 and 2026 have improved 9 cents and 11 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for GTX’s 2025 sales and earnings implies year-over-year growth of 2.6% and 16.7%, respectively. EPS estimates for 2025 and 2026 have improved 3 cents and 8 cents, respectively, in the past 30 days.
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General Motors Company (GM): Free Stock Analysis Report Copart, Inc. (CPRT): Free Stock Analysis Report OPENLANE, Inc. (KAR): Free Stock Analysis Report Garrett Motion Inc. (GTX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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