Freedom Broker experts have raised their price target for Karooooo (KARO) shares from $60 to $65, while simultaneously downgrading the recommendation from “Buy” to “Hold.” At the current market price of $62.69, the upside potential is about 3.7%, so despite strong financial results, most positive expectations are already reflected in the share price.
What Karooooo does
Karooooo (KARO) is an international developer of a cloud SaaS platform for managing commercial transport, logistics, and mobile assets. The company operates in more than 20 countries, serves over 125,000 corporate clients, and has more than 2.8 million active subscribers through its subsidiary platform Cartrack.
Strong results confirmed the effectiveness of growth investments
The first quarter was one of the strongest for Karooooo in recent years, Freedom Broker experts believe. Record subscriber growth confirms that investments in sales expansion made in the previous fiscal year are beginning to deliver the expected results. At the same time, the company’s current valuation already largely reflects these positive changes, so the recommendation needs to be moved to “Hold,” the analysts note.
For the first quarter of fiscal year 2027, Karooooo’s consolidated revenue rose 22% year over year to 1.56 billion South African rand (ZAR) ($94.8 million). Subscription revenue increased 19% to 1.35 billion ZAR (approximately $94.6 million), and in constant currency the increase was 21%, indicating sustained strong demand for the company’s services despite the strengthening of the South African rand.
Operating profit reached a record 410 million ZAR ($24.8 million), while adjusted EBITDA rose 18% to 642 million ZAR ($38.8 million). At the same time, operating profit in the Cartrack segment increased 16% to 395 million ZAR ($23.9 million), despite ongoing investments in business development. Cartrack is Karooooo’s largest division and core operating business. It is a cloud SaaS platform that helps companies manage fleets, track vehicles, and improve safety and operational efficiency.
Karooooo’s main driver is record new customer inflow
According to the analysts, the most important result of the quarter was the acceleration in customer-base growth. The number of Cartrack subscribers grew 18%, exceeding 2.8 million, while net customer additions jumped 70% to a record 142.5 thousand for the quarter.
This momentum confirms that the expansion of the sales team and investments in distribution development are starting to work exactly as management expected, Freedom Broker experts note. Demand is particularly strong for the new Cartrack Tag and AI Video products, which both increase average revenue per customer and stimulate cross-selling.
An additional source of growth remains the Karooooo Logistics division, whose revenue increased 46% to 177 million ZAR, driven by strong demand for quick-commerce solutions.
Why the recommendation was lowered to “Hold”
Despite the strong results, the analysts believe the near-term upside for the stock is limited. The quarter’s main weak spot was free cash flow (FCF), which fell to 60 million ZAR from 338 million ZAR a year earlier. This was primarily due to higher investment in IoT equipment and increased working-capital needs amid accelerating sales.
Freedom Broker believes the deterioration in cash flow is temporary: the decline in free cash flow should not be viewed as a structural problem for the business. The company is deliberately increasing investment in equipment and sales expansion to support further growth in its customer base. As the sales organization becomes more efficient and growth in marketing expenses slows, earnings per share should accelerate already in the following quarters.
Previous report
In May 2026, Karooooo reported strong results for the fourth quarter of fiscal year 2026. Revenue then rose 19% year over year to 1.45 billion South African rand, while the number of subscribers to the Cartrack platform increased 16% to 2.66 million.
After the earnings release, Freedom Broker analysts maintained their “Buy” recommendation but lowered the price target to $60. The experts noted that active investment in business expansion and the rollout of new products should underpin long-term growth.
This is not an individual investment recommendation