Copart (CPRT) $35 Call Expiring September 17th 2027
(Copart, Inc., $35 Call Expiring Sep 17th 2027)
Created: August 27, 2026
Price at writing:~$32.67 (August 26, 2026 close)
Conviction level: High (size so a total premium loss is acceptable, since there is no stop)
Key catalyst: Q4 FY2026 earnings, ~Sept 3, 2026 (date unconfirmed; the Sept 2027 expiry spans four earnings reports)
1️⃣ Trade Snapshot
The company. Copart (CPRT) runs the world's largest online salvage-vehicle auction. It is the marketplace where auto insurers sell off totaled and damaged cars, and dismantlers, rebuilders, dealers, and exporters bid on them, all through its online bidding platform (VB3). Its sellers are principally the major auto insurers, plus dealers, fleets, and government sellers; it has over 750,000 registered buyers across 11 countries and processes more than 4 million vehicles a year. It owns its storage yards (21,000+ acres), which is a big part of the moat.
The trade type. Catalyst-driven, with partial value support. This is explicitly NOT the value trade the $30 call was. At ~$32.67 the stock itself still sits inside the lower half of its fair-value range, but the $35 strike sits above the entire Conservative case and above the middle of the Base case, and the breakeven at $40.70 is reached only in the Bull case. The valuation cushion that sat under the $30 strike does not sit under this one. The DCF here is closer to a caution flag than a support.
Funding. This position is funded by closing the $30 Jan 21, 2028 call at , which leaves a net credit of roughly per contract. See Section 2 for what that swap gives up.
~$7.80
$2.10
What is this trade? You buy a call at the $35 strike expiring Sept 17, 2027, paying a premium up front for the right to buy shares at $35. You do not need CPRT to reach $35 to profit: the premium rises as the stock moves toward the strike (delta, the option's sensitivity to each $1 move in the stock) and as demand for options rises (vega). A move from ~$32.67 into the mid $30s would lift the premium well before expiration.
Profit-taking. No mechanical tiers. Hold and let the position run, aiming for at least +50%, then keep running it while the re-rating plays out rather than trimming at fixed triggers. Scale out at your discretion. Be aware what +50% requires here: with all of the premium being time value, the stock likely needs to reach roughly $39 to $40 to clear that target, which is the Base case at an 8% discount rate.
Stop loss. None set. The most you can lose is the premium, so the position is sized so a total loss is acceptable. There is no mechanical stop; see the thesis-breakdown note in Section 3 for the one discretionary exit worth keeping.
Why the timing works, and where it does not. The Sept 17, 2027 expiry spans four earnings reports: Sept 2026, then roughly Nov 2026, Feb 2027, and May 2027. The November and February prints are the realistic window for a volume inflection, and both sit comfortably inside this expiry, so the runway is adequate for a slow cyclical thesis. The timing problem is the entry, not the expiry. Buying now means paying for the volatility build ahead of the ~Sept 3 report. Options get more expensive as a big event approaches, because traders pay up for the uncertainty; once the report is out that uncertainty disappears and the premium drops fast even if the stock barely moves (this is called IV crush). At $5.70 this contract implies roughly 45.5% volatility against about 37.6% on the Jan 2028 contract being sold, so the swap sells cheaper volatility to buy richer volatility days before the print. Waiting until after the report costs you nothing unless the stock finishes above roughly $35 to $37.
How far does the stock need to move? About 7.1% to reach the $35 strike, and about 24.6% to reach the $40.70 breakeven if held to expiry. The 52-week range is $26.81 to $50.11, so at ~$32.67 the stock sits in the lower third of that range.
Split note: CPRT did a 2-for-1 split in August 2023. All prices, strikes, and targets here are post-split.
Key catalysts (detail in Section 5):
~Sept 3 earnings (Q4 FY2026). The near-term test, and Jay Adair's first call as returning CEO. The one line that matters is US insurance unit volume: if the recent 4.2% year-over-year decline narrows, the cyclical thesis gets confirmed.
The CCC Intelligent Solutions bid. Copart is in talks to acquire the car-insurance software provider, competing against private equity. It would push Copart into the claims workflow that feeds salvage supply.
Structural tailwind. Total-loss frequency keeps rising as cars get costlier to repair, which feeds more cars into Copart's auctions over time. It reached a record 23.6% in Q3 FY2026.
What's the most you can lose? The premium paid. NOTHING more. Defined-risk.
When does this trade stop making sense?
US insurance unit volume declines widen rather than narrow across the ~Sept 3 print and the ones that follow.
There is real evidence IAA (the RB Global rival) is taking share.
Operating margins roll over from the current ~37% level.
The Adair growth reset visibly stalls, or his first call produces no credible capital-allocation framework.
A CCC acquisition closes on terms that consume most of the net cash pile without a clear revenue or volume link.
Valuation Summary
Scenario
Fair Value Range (per share)
vs ~$32.67 (Aug 26)
Conservative
$24 - $31
-27% to -6%
Base
$30 - $40
-9% to +21%
Bull
$40 - $55
+21% to +68%
Caveat: The $35 strike sits above the entire Conservative range ($24-$31) and above the middle of the Base range ($30-$40). Only the top of the Base case and the Bull case clear it. The $40.70 breakeven is reached only in the Bull case, or at the very top of Base. This is the single biggest difference from the $30 trade, where the Conservative case straddled the strike. See the Growth Stress Test in Section 4.
Analyst Price Targets
Metric
Value
Average target (six named)
~$37.83 (+16% vs ~$32.67, Aug 26)
Median target (six named)
~$37.00 (+13% vs ~$32.67, Aug 26)
Range
$26 - $48
Consensus rating
Split Hold (mix of Buy, Hold, and one Underweight)
Aggregators disagree sharply on this name: TipRanks shows ~$35.50 across 6 analysts in the last 3 months, Investing.com ~$40.30 across 10, stockanalysis.com ~$47.60 across 5 but includes stale pre-2026 targets. The average and median above are computed from the six named targets below, which is the more reliable read.
Notable Analyst Price Targets
Analyst / Firm
Rating
Price Target
Notes
Baird (Craig Kennison)
Outperform
$48
Cut from $52, early 2026; exact date need to confirm
Jefferies
Buy
$45
May 22, 2026, post-Q3
Freedom Capital
Buy
$39
Initiated June 26, 2026
Stephens
Equal Weight
$35
Aug 20, 2026, most recent; sits exactly at the strike
JPMorgan (Jash Patwa)
Neutral
$34
Cut from $45; competitive fee pressure
Barclays (John Babcock)
Underweight
$26
Street low; cut from $32, July 21, 2026
Zacks downgraded CPRT from Hold to Strong Sell on July 28, 2026.
Where to Find More Detail
Section 2 (Overall Assessment) - The roll economics, conviction, key dependencies.
An out-of-the-money call on a wide-moat, fortress-balance-sheet business whose operating problem is salvage-volume quantity, not the marketplace itself. The business case is unchanged from July.
What changed is the price. The stock is up about 14% from the $28.59 July entry reference, while fair value has barely moved. On the July model's own assumptions with confirmed inputs, the Conservative range is $26 to $33; the stock has moved from the bottom of that band to the top of it.
Base-case DCF ($30-$40) straddles the strike rather than sitting entirely above it. The Bull case ($40-$55) clears both the strike and the breakeven.
The roll is expensive on three measures. Selling the $30 Jan 2028 at $7.80 and buying the $35 Sept 2027 at $5.70:
$30 Jan 21 2028 (selling)
$35 Sep 17 2027 (buying)
Time remaining
16.8 months
12.7 months
Implied volatility
~37.6%
~45.5%
Delta
~0.71
~0.57
Intrinsic value
$2.67
$0.00
Time value
$5.13
$5.70
Time value per month
$0.305
$0.449
Breakeven at expiry
$37.80
$40.70
You give up $2.67 of intrinsic value, pay about 47% more time decay per month, cut delta from 0.71 to 0.57, and push breakeven up by $2.90. The offsetting benefit is a net credit of roughly $2.10 per contract and a higher payoff if the stock runs hard.
The long tenor still does real work: four earnings reports, including the November and February window where a volume inflection is most likely.
Conviction level: High (size so a total premium loss is acceptable, since there is no stop). The business quality, moat, and balance sheet justify High on the underlying. The strike and the entry timing do not, which is why sizing carries even more weight here than it did on the $30.
Key dependencies: US insurance volume declines narrowing rather than widening, pricing power holding, the Adair growth reset gaining traction, no meaningful share loss to IAA, any CCC transaction being accretive rather than a cash sink, and disciplined position sizing given the absence of a stop.
3️⃣ Risk Management & Exit Framework
Position parameters
Stop loss: None set, by design. The defined-risk maximum loss is the premium, so the position is sized so a full loss is acceptable rather than capped by a mechanical stop.
Take profit: No tiers. Hold and let the position run, aiming for at least +50%, then scale out at your discretion as the re-rating develops. Note that +50% on $5.70 means roughly $8.55, which realistically needs the stock near $39 to $40.
Thesis-breakdown discretionary exit: The one exit worth keeping without a stop. If the ~Sept 3 print and the ones that follow confirm the volume decline is structural rather than cyclical (widening US insurance unit declines, margins rolling over, or clear IAA share loss), reassess and consider exiting even at a loss rather than riding the premium to zero.
With no mechanical stop, sizing is the risk control. Size the position so the premium is money you can lose in full, and let the thesis, not a price trigger, drive the exit. This matters more than on the $30, because there is no intrinsic value underneath and no valuation support at the strike.
Pre-earnings volatility rule (the live issue on entry)
This is a hold-through-catalyst position, so you are not selling into earnings to dodge IV crush. That is the design.
The rule still bites on the entry. Buying at $5.70 roughly four trading sessions before the print means paying an elevated volatility premium. If the report is a non-event, the contract loses value on volatility alone even with the stock flat: at 32% post-print volatility and an unchanged stock, the same contract prices near $3.84.
The threshold that decides it: Waiting until after the report only costs you if the stock finishes above roughly $35 to $37, depending on where volatility settles. Below that, you buy the identical contract cheaper.
Other rules
Do not average down on a falling call.
Theta (time decay) stays modest for most of the hold but accelerates in the final ~3 months; revisit well before then rather than holding into the decay window.
Remember the maximum loss is the premium and NOTHING more, which is the reason the no-stop choice is tolerable here.
4️⃣ Valuation Assessment
Inputs:
Price (August 26, 2026 close): ~$32.67
Shares outstanding: 925,811,482 (Q3 FY2026 10-Q cover page, as of May 27, 2026; confirmed against the market-cap divided by price identity)
TTM free cash flow (through April 30, 2026): ~$1.339B (~28.9% margin), NOT used as the base; see the note below
Net cash: ~$4.1B (April 30, 2026 balance sheet: $3.354B cash and restricted cash plus $0.846B held-to-maturity Treasuries, less ~$0.093B lease liabilities; revolver undrawn, no funded debt). Buybacks after April 30 are unconfirmed and would reduce this.
Forecast method: Two-stage (years 1-5, then 6-10) plus a terminal value
Plain terms: A DCF estimates today's value by projecting future free cash flow (FCF, the cash left after running and investing in the business) and discounting it back to today.
Why FY2025 and not the TTM figure: TTM free cash flow of $1.339B looks like growth but is a spending cut. Nine-month capital spending was $258.6M against $481.3M a year earlier, while nine-month operating cash flow fell 8.4% ($1,247M against $1,361M). Using the TTM base would raise every fair value by roughly 8%, on the assumption that Copart permanently halves land and yard investment. That is not a safe assumption for a business whose moat is owned acreage.
Historical FCF (what informed the growth rates)
Fiscal Year
FCF ($B)
YoY
Revenue ($B)
FCF margin
2021
0.53
+62%
2.69
19.6%
2022
0.84
+59%
3.50
24.0%
2023
0.85
+1%
3.87
21.9%
2024
0.96
+13%
4.24
22.7%
2025
1.23
+28%
4.65
26.5%
The five-year FCF compound growth rate is about 32% and the three-year about 23%. Neither is used. Copart gives no forward guidance, nine-month revenue is -0.2%, US service revenue is -2.1%, and US insurance unit volume fell 4.2% in Q3. Anchoring Stage 1 growth to trailing free cash flow while the underlying business is flat is the value-trap pattern.
Bull (14%): Assumes volumes recover and international, whole-car, and technology services re-accelerate. Base (9%): A recovery to mid-to-high single-digit revenue growth with modest margin expansion, above the consensus FY2027 EPS growth of 5% to 8%. Conservative (5%): Assumes the volume headwind largely persists.
Alternative assumption set: the July 2026 document used a more generous ladder (Conservative 6/4/2, Base 10/6/3, Bull 14/8/3). Run with these same confirmed inputs it produces Conservative $26-$33, Base $33-$46, Bull $41-$57. On that set the strike is better placed, sitting at the top of Conservative and the middle of Base. The difference is a judgment call about Stage 2 and terminal growth, not an error in either model.
Strike Positioning
$35 sits above the entire Conservative range ($24-$31) and above the middle of the Base range ($30-$40). Only Base at an 8% discount rate ($39.59) and the whole Bull case clear it.
The $40.70 breakeven clears the entire Base range and is reached only in the Bull case.
Against analysts, $35 sits below the average (~$37.83) and median (~$37.00), but exactly at Stephens' Aug 20 target, the freshest datapoint on the Street, which carries an Equal Weight rating.
Reverse DCF: At $32.67 the market already embeds about 8.3% Stage 1 FCF growth at a 9% discount rate. To justify $35 requires about 9.6%, and to justify the $40.70 breakeven requires roughly 14%. Copart has not grown free cash flow at a low-double-digit rate without unit volume growth, and unit volume is currently negative.
Growth Stress Test (critical)
Base assumes 9% Stage 1 FCF growth, which already implies a volume recovery Copart is not yet delivering.
If Stage 1 growth halves to ~4.5% (the structural-decline path), base-case fair value drops to roughly $27 at a 9% discount rate and $24 at 10%, which is 17% to 26% below today's price and far below the strike.
Translation: If the volume decline is structural rather than cyclical, this call expires worthless and the stock itself has meaningful downside from here. Watch US insurance unit volume on the ~Sept 3 print, not the headline revenue number, which pricing can prop up.
SBC note: Copart's stock-based pay is small (~$38M in FY2025, only ~3.1% of free cash flow) against ~$1.63B of buybacks over nine months, so reported FCF is close to real owner cash flow. No SBC-adjusted view is needed, which remains a genuine contrast with the software names in the book.
5️⃣ Catalyst Thesis
Earnings (Q4 FY2026, ~Sept 3). The key near-term test, and the first of four reports this expiry spans. The date is not officially confirmed: Copart has not issued its release notice, and sources split between Thursday Sept 3 and Wednesday Sept 9. Copart has reported after market close on a Thursday every quarter this fiscal year, which favours Sept 3. Consensus is $0.39 in earnings per share, down 4.9% year over year, with full-year FY2026 at $1.58 against $1.59 in FY2025. Watch US insurance unit volume above all: the year-over-year decline was 4.2% in Q3, and the cyclical thesis needs that to narrow. Also watch whether average selling prices keep offsetting soft volumes and whether margins hold near 37%.
The Adair growth reset. Returning CEO Jay Adair (who ran Copart from 2010 to 2024) took the role effective July 31, 2026, so this is his first quarterly call. He has flagged three growth pillars: international insurance expansion, US whole-car (non-insurance) volume, and technology services. A credible re-acceleration plan, plus a clear capital-allocation framework, is part of what could turn sentiment.
The CCC Intelligent Solutions bid (new since July). Bloomberg reported on Aug 18, 2026 that Copart is in talks to acquire CCC, the car-insurance claims software provider, competing against private equity firms including GTCR and Veritas Capital. CCC carries a market value near $4.2B. Strategically this pushes Copart upstream into the claims workflow that decides which cars get totaled, which is the supply that feeds its auctions. Treat it as rumour-stage, not a signed deal, and see Section 7 for the cash-use risk.
Pricing power is intact. Even with unit volumes down, US insurance average selling prices reached a seasonally adjusted record in Q3, and international revenue grew 14.1%, more than offsetting the volume shortfall to produce 2.1% total revenue growth. That is evidence the marketplace and its pricing leverage are not the problem.
Structural tailwind: rising total-loss frequency. Cars are increasingly expensive to repair (sensors, cameras, complex parts), so more damaged cars get written off entirely. Total-loss frequency at US auto insurers reached a record 23.6% in Q3 FY2026, up from roughly 16% a decade ago. Over time that feeds more cars into Copart's auctions, partly offsetting the claims-volume headwind.
Fortress balance sheet and buybacks. Copart holds roughly $4.1B in cash and Treasuries with essentially no funded debt, pays no dividend, and repurchased 43.4 million shares for $1.63B over the first nine months of FY2026 at a weighted average price of $37.63. Share count fell from 967.5M to 925.8M, about 4.3%, in nine months. That removes solvency risk from the thesis entirely and shrinks the denominator on every future dollar of cash flow.
6️⃣ Strike Structure
Strike: $35. Breakeven at expiration:$40.70 ($35 strike plus $5.70 premium). Required move: ~7.1% to the strike, ~24.6% to breakeven if held to expiry.
Estimated delta: ~0.57 (derived from the quoted $5.70 premium; confirm on the live Wealthsimple chain). Estimated implied volatility: ~45.5% (same caveat). Days to expiration: ~386.
How it makes money before reaching $35:
Delta. Each $1 rise in CPRT adds roughly $0.57 to the premium at current levels, and that sensitivity grows as the stock approaches $35.
Vega. Longer-dated options carry more vega, so any rise in demand for the options lifts the premium even without a big stock move. The caution here is that vega cuts both ways, and you are entering when volatility is already elevated ahead of the print.
Theta. Works against you daily and is heavier than on the Jan 2028 contract, roughly $0.449 of time value per month against $0.305, though it stays manageable until the final months.
A move to roughly $36 to $37 in the months ahead would put the contract solidly in profit, though clearing the +50% target realistically needs the stock near $39 to $40.
7️⃣ Key Risks
Volume deceleration turning structural (the main risk). If US insurance unit declines widen instead of narrowing, the Base case breaks and the strike ends out of the money. Stress-case fair value of $24-$27 sits well below both today's price and the strike. This is the number to watch on ~Sept 3.
Entry volatility (the risk specific to this entry). At $5.70 the contract implies roughly 45.5% volatility, against 37.6% on the position being sold. Buying days before the print means paying an event premium that disappears whether the report is good or bad. At 32% post-print volatility with the stock unchanged, the same contract prices near $3.84, roughly 33% below the entry price.
Breakeven above the Base case.$40.70 is above the top of the Base range on the assumptions used here and above five of the six named analyst targets. Holding to expiry requires a Bull outcome, not merely a correct one.
CCC acquisition as a cash sink. A $4B-plus deal would consume most of the net cash that is 13% to 14% of the DCF equity value, convert liquid assets into goodwill, add integration risk, and likely slow the buyback that has been shrinking the share count 4%-plus a year. The strategic logic is sound; the price and financing terms are unknown.
CEO transition and execution. Adair has been in the seat under a month. A leadership change at the lows is a sentiment risk until the growth reset shows results.
IAA competition. Morningstar flags that Copart's moat could soften if RB Global keeps improving IAA. Evidence of real share loss would undercut the thesis.
DOJ investigation. The Q3 FY2026 10-Q discloses an ongoing US Department of Justice investigation into potential money-laundering violations related to auction member vetting, with the company unable to estimate a range of possible loss. Low probability of materiality, but genuinely open-ended.
Unconfirmed earnings date. Sept 3 versus Sept 9 is unresolved, which matters for any decision to time entry around the print.
No stop, so total premium loss is a live outcome. By choice there is no mechanical stop, so if the thesis is wrong the position can go to zero. This is tolerable only because the loss is capped at a deliberately sized premium, and it is a larger concern here than on the $30 because there is no intrinsic value and no valuation support beneath the strike.
Counter-argument (why this can work): The business is not broken. Revenue is still growing on pricing, operating margins are ~37%, the balance sheet is a fortress, total-loss frequency is at a record and structurally rising, and the buyback is retiring more than 4% of shares a year at prices near $37.63, above today's quote. Four earnings reports before expiry give a slow cyclical recovery genuine room to show up, and the November 2026 and February 2027 prints both fall inside. If insurance coverage rates normalise as premium inflation cools, unit volumes inflect, and a single clean print reverses the negative estimate cycle, the analyst average near $37.83 and Baird's $48 sit above both the strike and the breakeven.
Research for personal use. Not investment advice. Verify pricing, the live option chain (premium, delta, vega, implied volatility, breakeven), share count, net cash, the confirmed earnings date, and material developments through primary sources before any transaction. The DCF is a scenario tool, not a prediction; small changes in growth and discount-rate assumptions move fair value a lot.