We came across a bullish thesis on Copart, Inc. (CPRT) on Andvari’s Substack by Douglas Ott. In this article, we will summarize the bulls’ thesis on CPRT. Copart, Inc. (CPRT)’s share was trading at $62.70 as of Nov 22nd. CPRT’s trailing and forward P/E were 43.85 and 37.74 respectively according to Yahoo Finance.
A busy car auction being held at a leading car dealership, buyers and sellers engaging in active bidding.
Copart delivered impressive Q1 2025 results, exceeding expectations and sending the stock up 10.2% the day after the announcement. This stands in stark contrast to the previous quarter, where the company missed estimates, causing a 6.7% drop in its stock. Copart’s insurance business grew by 13% in unit volume for the quarter, with a more modest 9% growth excluding catastrophic events. The Blue Car business, catering to banks, fleets, and rental companies, saw a robust 20% year-over-year growth. The company also indicated that investments in SG&A would slow over the next year, setting the stage for strong operating leverage moving forward. Despite these strong performances, Copart’s growth story remains heavily shaped by its ability to manage natural catastrophes, an area where the company’s preparedness has set it apart in the auto salvage market.
Hurricane Helene and Hurricane Milton caused significant damage in late September and early October 2024, with estimates showing over 250,000 vehicles were damaged across the Southeast U.S. Copart’s response to these storms was notably swift, outperforming previous hurricane responses. The company had already set up the necessary infrastructure, including 2,000 acres of dedicated storage across the U.S., with 1,000 acres specifically in Florida for processing storm-damaged vehicles. Their ability to pick up twice as many vehicles in the first 10 days of the storm compared to Hurricane Ian in 2022 highlights Copart’s strategic investments in technology and logistics. By the end of October 2024, Copart had sold a quarter of the vehicles assigned from these storms, demonstrating the speed of its execution and further cementing its dominance in the salvage auction space.
The auto salvage industry also benefits from trends such as increasing total loss frequency, which has seen a steady rise over decades. While new car technologies may reduce the number of accidents, they simultaneously increase repair costs, leading to more total losses—ideal for Copart’s business model. Furthermore, population growth continues to drive vehicle miles traveled, compensating for the decreasing number of accidents per mile driven. Copart’s long-term prospects remain bolstered by these structural trends, despite challenges posed by emerging vehicle safety technologies like autonomous driving.
While autonomous driving could eventually reduce accident rates, historical data on the adoption of auto safety technologies suggests that any such shift would be slow. For example, it took nearly 50 years for electronic stability control to reach widespread adoption. Given this timeline and the complexity of autonomous vehicles, the risk posed to Copart remains minimal. Even as Copart faces headwinds from new technologies, its strong execution, particularly in catastrophe response and its resilient business model, ensures its leadership in the auto salvage industry.
Copart, Inc. (CPRT) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 48 hedge fund portfolios held CPRT at the end of the third quarter which was 50 in the previous quarter. While we acknowledge the risk and potential of CPRT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CPRT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.