Shares of America's Car-Mart (NASDAQ:CRMT) have been in a correction since mid-August, but it looks like that trend may be over. The FQ results were much better than expected and point to another strong year for the company. Price action bears the hallmarks of a Head & Shoulders reversal, but, as Mr. Livermore says, it's okay to anticipate a move. It's not okay to act on an expectation before the market gives its signal. If price action can get above $129.50 and stay there, it will signal what we are looking for.
America's Car-Mart Accelerates Growth
America's Car-Mart reported a fantastic quarter despite supply chain headwinds and recorded low inventory of used cars. The company's focus on digital and expanding market share at existing dealerships is working. The net $288.3 million in sales is up 29.1% from last year, which is on top of a 17% accelerating previous year.
The revenue also beat the Marketbeat.com consensus by 240 basis points and delivered strong growth on the bottom line. Revenue growth was driven by a 6% increase in unit sales coupled with a 21% increase in the average selling price that we do not see subsiding any time soon. The company says active customers grew 10% YOY in terms of customers and repeat business, with repeat buyers making up more than 50% of total sales.
Moving down, the company experienced significant leverage due to volume and pricing. The company's profit per vehicle increased more than 11% and helped to strengthen an already healthy balance sheet. On the bottom line, the GAAP $3.33 in earnings beat the consensus by $0.13 and put the company firmly on track to beat the full-year consensus as well.
The company did not offer any guidance but, reading between the lines, the outlook is favorable for revenue and earnings growth to continue on both a sequential and YOY basis. Not only does demand remain high, but inventory is still tight and, with the microchip shortage, likely to remain tight until the new auto market stabilizes. Jeff Williams, President, and CEO said
“We continue to see solid productivity improvement and market share gains in an operating environment with historic supply and demand imbalances. The investments we are making in our inventory procurement area have allowed us to consistently offer better quality vehicles to our customers and keep our dealerships sufficiently stocked during this difficult supply period."
The Analysts Are Bullish On America's Car-Mart
The analysts are bullish on America's Car-Mart and see significant gains for the stock, but there is a caveat. While the consensus rating is a firm Buy with a price target of $185, Marketbeat.com reveals there've been only two analysts ratings issued this year, and those were earlier in the summer. While we are bullish on the stock, it might be some time before that price target is reached.
The Technical Outlook: American's Car-Mart Might Be Reversing
The chart of America's Car-Mart certainly bears the appearance of a Head & Shoulders bottom, but that does not mean the stock is in reversal. The post-release action has the price down and possibly moving lower in the near term at least. If price action can't hold support at or near the current level (to form the right shoulder), then it may be range-bound at these levels for the next few weeks or months.
However, if price action can rebound from a higher support level and form the right shoulder, we would start getting more bullish on the stock and anticipate a break above the neckline and fire a good, strong reversal signal.
