Copart: Digging a Wide Moat From Junked Vehicles

We are initiating coverage on salvage vehicle auctioneer Copart with a wide moat and a $77 fair value estimate. We see the firm as a phenomenal business with only one large competitor in IAA, which RB Global (formerly Ritchie Bros.) acquired in March. Copart operates vehicle auctions after vehicles are declared totaled, providing an online-only marketplace that optimizes liquidity for sellers, primarily insurance companies, and buyers such as dismantlers, used vehicle retailers, exporters, and private individuals. This highly liquid marketplace helps create a network effect as sellers benefit from a wide buyer network due to increased bidding competition, and buyers benefit from higher vehicle volumes.