The auto/tires/trucks sector has been in a slump, as evidenced by weaker results and forecasts from manufacturers like Ford Motor Co. (NYSE: F) and Stellantis (NYSE: STLA). High financing costs and an uncertain macroeconomic climate have caused consumers to tighten their spending, especially on big-ticket items like cars. However, not every part of the automobile industry is in a slump. The auto aftermarket of used cars and car parts is still thriving, and some companies are capitalizing on the action. Here are two stocks that are thriving in the auto aftermarket.
Copart: Falling Used Car Prices Is a Boon for This Global Auto Auction Site
Operating in 11 countries, Copart Inc. (NASDAQ: CPRT) is a global online auction and remarketing services provider specializing in automobiles and auto parts. It auctions off salvaged, damaged, and clean-titled vehicles to dealers, exporters, dismantlers, and consumers. The platform is used by sellers, including insurance companies when cars are totaled for a total loss, auto dealers, consumers, and junk yards. Bidders can bid online to buy everything from parts to used cars.
Buyers and sellers can list their items on Copart. Sellers can also sell to the company through Copart Direct and get an offer, as well as have their vehicles picked up. The platform is unique in that it buys and sells junked auto parts, but its origins started as a junkyard that grew into a $50 billion empire. Copart lists 350,000 vehicles daily on their site.
Despite Slump in the Auto Market, Copart Is Still Growing
In its fiscal fourth quarter of 2024, Copart reported EPS of 33 cents, missing analyst estimates by 3 cents, but revenues rose 7.2% YoY to 1.07 billion, matching consensus estimates. For the fiscal full year of 2024, Copart grew revenues 9.5% YoY to $4.2 billion and generated a net income of $1.4 billion, up 10.1% YoY.
Falling User Car Values = More Total Loss Junked Vehicles from Insurers
The insurance seller's business grew 6% YoY, attributed to Copart's industry-leading auction liquidity. The Manheim Used Vehicles Value Index fell 8.6% YoY.
Incidentally, the decline in used vehicle values has driven total loss frequency back up, resulting in more junked cars being auctioned off. Total loss frequency has normalized back to pre-pandemic levels.
Copart CEO Jeff Liaw explained that with falling car values, repairing vehicles is more costly than claiming a total loss. Liaw provided insight on the trend, “All indications are that the long-term trends in the repair industry towards increasing vehicle complexity, as measured, for example, by the average number of parts to repair a vehicle as well as rising labor rates continue to tip the scales in favor of totaling vehicles rather than repairing them.”
eBay: Motors Parts & Accessories Leads the GMV Growth
eBay Inc. (NASDAQ: EBAY) is the world's largest online auction marketplace. While literally everything and anything can be listed for auction or sale on the site, the two growing segments are its collectibles segment, which includes trading cards, comic books, sneakers, jewelry, and coins, and its eBay Motors segment. eBay Motors enables buyers and sellers to complete auctions and sales for aftermarket vehicles. Within eBay Motors is its Parts & Accessories (P&A) category, which was the largest contributor to overall gross merchandise volume, making it a key focus category. Its P&A segment offers car and truck parts as well as ATV, UTV, Motorcycle, and Boat parts, which can be searched for by year, make, model, trim, and engine.
eBay Motors Parts & Accessories
While eBay doesn't break down the actual revenue for its categories and segments, it did drop some clues. During its second quarter of 2024 conference call, eBay CEO Jamie Iannone cited that in its Focus category growth drivers, its Motors Parts & Accessories (P&A) was its largest gross merchandise volume (GMV) segment ahead of collectibles, refurbished, and luxury goods. GMV is the total value of all paid transactions between users on the platform.
Its Focus category had the most growth, rising 4% YoY and outpacing the rest of its online marketplace by 5 points. eBay’s Q2 2024 GMV was $18.4 billion, up 1% YoY.
