Why Karooooo Stock Stumbled Today
The connected vehicle and logistics specialist reported results that were panned by investors. But the devil's in the details.
Shares of Karooooo (KARO -2.49%) dropped significantly on Tuesday, plummeting as much as 9% early in trading. By 11:54 a.m. ET, the stock had declined 2.1%. The reason for the decline was Karooooo's financial report, but the story isn't as grim as it first appeared. The company's fiscal 2027 second quarter ended on August 31, and Karooooo reported revenue that grew 22% year over year to $101.8 million.
The growth was driven by its Cartrack fleet telematics segment, with revenue up 20% to $90 million. Revenue from its Karooooo logistics segment increased 36% to $11.8 million. Despite record profits, earnings per share (EPS) fell short of investor expectations, rising 18% to $0.58. Other metrics were generally strong, with subscription revenue rising 31% to $88 million due to record net subscriber additions that drove total subscribers up 18% to 2.9 million.
This contributed to Cartrack's annual recurring revenue (ARR) increasing 30% to $354 million with a retention rate of 95%. In its regulatory filing, Karooooo explained that it made a strategic decision to stock up on vehicle-tracking devices and memory chips due to projected rising prices. Although this decision hurt the bottom line in the short term, Karooooo expects it will save money on these components, ultimately boosting profits.
Despite robust growth, the stock fell in early trading as Wall Street had expected higher profits. Fair-weather investors sold the stock, but at 25 times forward earnings, Karooooo's stock is still priced to move.
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