Copart shares tumble as earnings miss and underperformance weigh on investor sentiment
Revenue contracted while adjusted earnings per share fell short of forecasts, yet Wall Street analysts maintain a cautious optimism with a mean price target suggesting significant upside potential.
Copart Inc (CPRT) has struggled to keep pace with the broader market, with its shares declining 45.6 per cent over the past 52 weeks. This performance stands in stark contrast to the S&P 500, which returned 26.6 per cent in the same period, as well as the State Street Industrials Select Sector SPDR ETF, which rose 27.1 per cent. The company, a Dallas-based leader in online vehicle auctions and remarketing services, also underperformed the industrials sector significantly during this timeframe.
The recent downturn was exacerbated by the release of worse-than-expected results for the second quarter of fiscal 2026. On 20 February, Copart shares fell 3.1 per cent immediately following the announcement. The company reported revenue of $1.1 billion, a decrease of 3.6 per cent from the prior year's quarter, which failed to meet consensus estimates. Additionally, adjusted earnings per share came in at $0.36, also falling short of Wall Street forecasts.
Despite the negative earnings surprise, investor sentiment remains mixed rather than uniformly bearish. The company maintains a consensus "Moderate Buy" rating among the 12 analysts currently covering the stock. The breakdown of opinions includes five "Strong Buys", six "Holds", and one "Strong Sell". This configuration has remained relatively stable in recent months, indicating that while the immediate results were disappointing, the long-term fundamentals have not been entirely discarded by the Street.
Outlook for the current fiscal year, which concludes in July, suggests a marginal decline in profitability. Analysts expect diluted earnings per share to fall to $1.58. This expectation follows a history of mixed earnings surprises, with Copart meeting or surpassing consensus estimates in three of the last four quarters prior to the recent miss. The divergence between the recent miss and the maintained buy ratings highlights the complexity of the investment case for the vehicle remarketing giant.
Wall Street analysts continue to price in substantial recovery potential despite current headwinds. The mean price target stands at $47.22, representing a 41.8 per cent premium to current market prices. Furthermore, the highest price target among analysts is set at $65, which suggests an upside potential of up to 95.3 per cent from current levels. This disparity underscores the varying degrees of confidence among market participants regarding the company's ability to reverse its recent underperformance.
Notably, analyst sentiment has not been monolithic, with some firms adjusting their outlooks following the earnings report. On 23 February, JP Morgan analyst Jash Patwa maintained a "Neutral" rating for Copart but lowered the price target from $45 to $34. This adjustment reflects a more cautious stance on the immediate prospects, contrasting with the broader consensus that still sees value in the stock's long-term trajectory.
