Copart's Shares Plunge 10% in 6 Months: More Downside Ahead?

Core Viewpoint - Copart, Inc. has experienced a decline in share price and is facing challenges due to high operating costs and increased capital expenditures, leading to a negative outlook for the near term [1][3][6]. Financial Performance - Shares of Copart have decreased by 10.3% over the past six months, slightly better than the Zacks Auction and Valuation Services industry's decline of 10.8% [1]. - In the fourth quarter of fiscal 2024, Copart reported adjusted earnings per share of 33 cents, which fell short of the Zacks Consensus Estimate of 37 cents [4]. - Fiscal 2024 capital expenditures reached $511 million, primarily focused on storage capacity expansion, which is expected to impact cash flows [3]. Cost Structure - Operating costs have been rising, with G&A expenses as a percentage of sales increasing to 9.1% in Q4 fiscal 2024 from 6.7% in the same period the previous year [3]. - The company anticipates continued increases in G&A expenses due to investments in sales, marketing, and technology, which may pressure near-term margins [3]. Market Sentiment - Technical indicators suggest that Copart's stock has been trading below the 50-day simple moving average since September 5, 2024, indicating a potential downtrend [4]. - EPS estimates for fiscal 2025 have declined by 6 cents over the past week, contributing to a negative outlook for the stock [6]. Investment Recommendations - Given the current challenges, the stock is rated as a Zacks Rank 5 (Strong Sell), suggesting that it may be prudent to avoid investing in Copart at this time [6].