Why Karooooo Stock Stumbled Today
Key Points
Karooooo's financial report included profits that fell short of expectations.
However, management made a shrewd move that will pay off in the long run.
- Motley Fool Issues Rare "Total Conviction" Buy Alert ›
Shares of Karooooo (NASDAQ:KARO) tumbled out of the gate on Tuesday, falling as much as 9%. As of 11:54 a.m. ET, the stock was still down 2.1%.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
The catalyst that sent the Internet of Things (IoT) and logistics specialist lower was the company's financial report -- but things aren't what they seem.
Image source: Getty Images.
Hidden in the disclosure
For its fiscal 2027 second quarter (ended Aug. 31), Karooooo reported revenue that climbed 22% year over year to $101.8 million. The results were driven higher by its Cartrack fleet telematics segment, with revenue up 20% to a record $90 million, while revenue from its Karooooo logistics segment rose 36% to $11.8 million. Despite record operating profits, the bottom line fell short of investor expectations, with EPS rising 18% to $0.58 (more on that in a minute).
Other metrics were generally robust. Subscription revenue of $88 million climbed 31%, fueled by record net subscriber additions, which drove total subscribers up 18% to 2.9 million. This helped drive Cartrack's annual recurring revenue (ARR) up 30% to $354 million, with an ARR retention rate of 95%.
Despite generally robust growth, the stock slumped in early trading, as Wall Street had projected higher profits. Buried in its accompanying regulatory filing, however, management explained that it made the strategic decision to stock up on vehicle-tracking devices and memory chips in anticipation of rising prices. While this decision weighed on the bottom line in the short term, Karooooo will ultimately save money on these components, fueling higher profits overall.
Fair-weather investors fled the stock on the news, but at 25 times forward earnings, Karooooo stock is priced to move.
Should you buy stock in Karooooo right now?
Before you buy stock in Karooooo, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Karooooo wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $376,696!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,333,920!*
Now, it’s worth noting Stock Advisor’s total average return is 925% — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of October 20, 2026.
Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Karooooo. The Motley Fool has a disclosure policy.
