Stifel analyst J. Parker Lane downgraded Karooooo to Hold from Buy with a price target of $26, down from $28. The top-line for fiscal Q3 came in above expectations, but since newer businesses like Carzuka and Karooooo Logistics drove the bulk of the upside the company missed expectations on the bottom line because these segments carry much lower gross and operating margins than the core Cartrack business, the firm explained. Stifel believes the company will remain in investment mode to scale newer businesses in FY24 and believes near-term profits will come under pressure as a result, prompting the downgrade until there is more visibility on the potential upside and payback period.
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