I’ve recently been looking at Copart as a potential investment. Broadly speaking, I like the contrarian angle of looking outside the current “AI trade” and finding companies that may have their day in the future.
Copart runs a disciplined balance sheet, generates strong cash flow, has favorable margins, high ROI, network effects, a unique marketplace, and other assets that seem to leave competitors behind (I’d like to learn more about their competition and alternatives).
I also realize they’ve recently missed slightly on revenue and EPS, but much of that seems to align with the historical cyclicality of their business. In other words, they’ve experienced periods in the past where insurance claims and available salvage inventory have fluctuated.
The stock also dropped over 5% today following the unexpected news that CEO Jeff Liaw will be stepping down effective July 31st.
I’m aware of some of the arguments against the company — safer vehicles, autonomous driving technology, the asset-heavy nature of the business, and potential declines in auto insurance coverage — but I’d like to hear more perspectives.
What’s the bear case for Copart? Or, if you’re inclined, feel free to share your bull case as well.
Thanks.