Bear of the Day: Copart (CPRT)

Copart is a provider of online auctions and vehicle remarketing services. The company enables the processing and selling of vehicles over the internet through its virtual bidding, auction-style sales technology to vehicle sellers, insurance companies, banks, dealers, and vehicle rental companies.

Copart offers a variety of services such as online seller access, salvage estimation, end-of-life vehicle processing, vehicle inspection, title processing and procurement. The company permits the selling of vehicles through CashForCars.com. In addition, its Copart Recycling service allows the public to purchase parts from salvaged vehicles, while its Copart 360 online technology platform is used for posting vehicle images.

Key challenges remain for Copart in 2026. The company faces sustained pressure from rising operating costs, as higher expenses and ongoing investments in employees, technology, and infrastructure weigh on near-term margins.

Continued spending to support growth initiatives may further constrain profitability. Over time, improvements in vehicle safety systems and autonomous driving technology could reduce accident frequency, limiting salvage supply and slowing inventory growth.

The Zacks Rundown

A Zacks Rank #5 (Strong Sell) stock, Copart CPRT is a component of the Zacks Auction and Valuation Services industry group, which currently ranks in the bottom 16% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has so far this year:

Image Source: Zacks Investment Research

Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.

CPRT shares have widely underperformed the market over the past year. Despite the absence of participation in the latest bull market, shares remain relatively overvalued. The lack of a sustainable growth path signals further caution ahead.

Recent Earnings Miss & Deteriorating Outlook

Copart broke a streak of positive earnings surprises when it missed fiscal second-quarter estimates back in February. The company posted earnings of 36 cents per share during the quarter, missing the Zacks Consensus EPS estimate by 10%.

Copart also missed on the top line as sales fell nearly 4% year-over-year. This triggered cuts to forward guidance, contributing to fading earnings momentum and a lower Zacks Rank. Consistently falling short of projections is a recipe for underperformance, and CPRT is no exception.

The Dallas-based company has been on the receiving end of negative earnings estimate revisions as of late. Looking into the current fiscal year, analysts cut estimates by 4.82% in the past 60 days. The Zacks Consensus Estimate is now $1.58 per share, translating to a 0.63% decline relative to the prior year.

Image Source: Zacks Investment Research

Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.

Technical Outlook

As illustrated below, CPRT stock is in a sustained downtrend. Notice how the stock has been widely underperforming the major indices. Also note that shares are trading below downward-sloping 50-day (blue line) and 200-day (red line) moving averages – another good sign for the bears.

Image Source: StockCharts

CPRT stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. The lack of buying pressure is a sign that this stock should be avoided. Shares would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. The stock has fallen more than 40% in the past year alone.

Final Thoughts

A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that CPRT stock is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns.

Revenue concentration among a relatively small group of large sellers adds risk, as the loss of key agreements or less favorable terms could materially impact results. Intense competition for vehicle supply, contracts, and storage capacity may also restrict growth and pressure returns.

A shaky earnings history and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend. Bulls will want to steer clear of CPRT until the situation shows major signs of improvement.

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Copart, Inc. (CPRT): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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