Barrington upgrades Copart stock rating on ACV acquisition

Barrington Research upgraded Copart's stock rating to "Outperform" from "Market Perform" after the company announced its pending acquisition of ACV Auctions. This upgrade sets a price target of $40.00 for Copart's stock, which is around 31% higher than the current share price of $30.48. The downgrade follows Copart's recent fiscal fourth-quarter results, where earnings per share were $0.35 on $1.15 billion in revenue, falling slightly short of analysts' expectations.

However, revenue was 2.4% above the prior year's $1.14 billion, driven by increased revenue per unit and higher purchases of vehicles.

Barrington Research sees the ACV acquisition as a long-term growth opportunity for Copart. They believe the deal will provide a new growth leg for the company, and the positive impact of this acquisition, combined with new leadership, led to the rating change. Additionally, Barrington Research noted that Copart's management has been actively buying back shares, and the company maintains a strong balance sheet with more cash than debt, which supports its acquisition strategy.

The proposed deal values ACV at approximately $1.9 billion and is expected to be completed with Copart paying $10.50 per share, representing a 45% premium over ACV's last closing price. This acquisition is part of Copart's strategy to expand beyond its core auction business. Copart's international operations also performed well during the quarter, with revenue increasing by 11.7%.