World’s largest online vehicle and salvage e-commerce auction platform Copart Inc. (NASDAQ: CPRT)
has grown to over 750,000 members spanning 170 countries showcasing over 150,000 vehicles online daily. From amateur do-it-yourselfers to professional dealers, Copart facilitates transactions between buyers and sellers of vehicles and parts through over 200 lot locations throughout 11 countries. They are the eBay (NASDAQ: EBAY)
of the vehicle and salvage industry. The increasing complexity of new cars has driven the rising trend in total loss claims. Rather than repair and fix, it’s cheaper just to replace. This provides a robust pipeline of inventory from insurance companies. The expanding reach of the online platform has opened the gateway for new world buyers providing liquidity for global supply chains. The growing trend in total loss salvage vehicles and parts has bolstered Copart’s inventories to meet the demand from buyers in fast-growing international economies that also have the least automotive penetration (IE: Eastern Europe, Africa, and Central and South America). With topline growth consistently exceeded 20-percent YoY shares are test all-time highs heading into Q4 2019 earnings with high expectations.
Copart reports Q4 2019 earnings after the close on Feb. 19, 2020. Consensus analyst estimates are for 0.66 EPS on revenues of $576 million. With YoY top-line growth in U.S. exceeded 25-percent in and 20.1-percent international, investors will want more visibility on the international expansion (notably Germany and unwinding U.K.) and penetration. While Copart’s business remains mostly outside of Asia, investors will want updates on any financial impact either directly or indirectly from the spread of coronavirus. Since there’s no direct business link to China, sentiment may get a boost in the context of a global pandemic disrupting manufacturing supply chains. Copart’s narrative as a defensive play can be galvanized if there’s no material impact from coronavirus in its forecasts.
Rifle Chart Technical Analysis Trajectories: Longer-Term
Utilizing the rifle charts on wider time frames suitable for swing traders and investors, CPRT shares have been in a perfect storm breakout anchored by the monthly pup breakout and weekly pup and mini pups. The monthly 5-period moving average (MA) support sits at the 93.88 Fibonacci (fib) level targeting upper Bollinger Bands (BBs) at 114.43. The weekly 5-period MA overlaps at the 110.61 fib with upper BBs upside target at 109.61. The weekly stochastic has flatlined near the 95-band, which could result in a channel tightening lean to 93.46 fib and 15-period MA if stochastic collapse through the 80-band.
The 104 area has been a line in the sand resistance that has tested four-times daily with rising lows. This is setting up for a potential ascending triangle breakout or a weekly market structure high (MSH) sell trigger under 100.40. Upside targets are 105.60, 109.61 and 114.43 upper BBs on all three wider time frames. Downside targets at 97.16, 93.48 and 90.88 fib. Stochastic on all time frames are lofty (above 80-bands) and any disappointment can trigger a sharp gap down.
CPRT trades as a player in both the retail auto industry and e-commerce auction platforms. Position correlation is strongest with retail auto re-sellers CarMax (NYSE: KMX) and Carvana (NYSE: CVNA) . If CPRT shares exceed +/- 10-percent, then EBAY correlation may kick in as well. EBAY also offers automobile auctions on its platform along with numerous vehicle parts, however, these are peer-to-peer transactions versus CPRT physically storing inventory on their auction lots where buyers can physically view and examine before purchasing.
Trading Game Plan for Earnings Gap:
This information is accommodative to intraday and short-term traders looking to play the earnings gap. Most intraday traders should focus on keeping trades segmented to the morning session for the best liquidity. Reversion scalps off the key price inflections levels can be played for the second gap reaction then shift focus to the third reaction trend move. The gap price reversion levels for the upside earnings gaps are: 105.60 daily upper BBS/sticky 5s, 107.33 fib/stick 2.50s, 109.61 weekly upper BBs/sticky 5s and 114.43 monthly upper BBs. Downside gap reversion price levels are: 100.61 fib/weekly MSH trigger/sticky 5s, 99.21 fib, 97.16 fib and 93.46 super fib/monthly 5-period MA/weekly 15-pd MA. For active scalpers, the in-between fibs and sticky 2.50s/5s ranges provide more intraday price inflection points to trade off. Expect thin liquidity in the first 20-minutes as spreads and ranges tighten. It’s prudent to give wide wiggle room from .35-.75 on the main fibs and scaling in smaller increments on entry and exits is prudent.