Karooooo Heads Into Earnings With Short Sellers Piling In

KARO reports today with an unusual dynamic in its borrow market: short interest has nearly tripled in the past month, yet the lending pool remains far from strained.

The pace of short-side accumulation is the standout signal heading into the print. Shares short have risen 86% over the past week and roughly 189% over the past month, reaching 0.77% of the free float. In absolute terms that remains a low level, but the velocity is notable. Despite the surge in borrowed shares, availability is generous at 508%, meaning there are roughly five shares available to borrow for every one already lent out. Borrowing costs are also negligible at 0.81% per annum, down nearly half from a week ago. The borrow market is not tight. Short sellers are building positions, but there is no squeeze pressure.

The stock itself is up 2.8% in the latest session at $62.10, though it has given back nearly 7% over the past month. Most software peers finished the session lower, with HUBS down 3.3%, AVPT off 3.6% and APPF falling 3.0%, making KARO's day-session gain a relative bright spot. Analyst coverage has been thin. The most recent moves, both from Raymond James and Needham, date to mid-July when both firms lifted targets to $75 while maintaining positive ratings. One broker downgraded to Hold on the same day. Those notes are now three months old and carry limited weight on the day of a print.

The bull case centres on subscriber momentum: the last quarterly result showed record net new subscribers of 142,472, up 70% year on year, with management guiding Cartrack subscription revenue to R5.7 to R6 billion for FY27 at an expected 70% to 72% gross margin. Bears point to the other side of the same coin. Cartrack and South Africa together represent the bulk of the business, leaving the company exposed to rand weakness, emerging-market volatility and the pricing pressure that tends to follow rapid subscriber growth. The PE multiple of about 22.7 times and EV/EBITDA near 10.5 times are not demanding for a high-growth software business, but both have drifted lower over the past month as the stock has retreated.

One ownership detail is worth flagging. Founder and CEO Isaias Jose Calisto holds a Schedule 13D filing and controls around 57% of shares. According to ORTEX's EDGAR data, he sold shares across multiple sessions in August totalling roughly $1.9 million at prices in the $63 to $64 range, modestly above where the stock trades today. The sales were not under a 10b5-1 plan. Positions disclosed under Schedule 13D/G are event-driven around the 5% threshold and represent stakes as last disclosed. The concentration of ownership in the founder, combined with recent disposal activity just above current prices, adds context to what the Street's price targets are actually measuring.

The print is therefore a test of whether the subscriber growth rate from Q1 has held into Q2, and whether management's FY27 guidance remains intact in the face of rand headwinds and the competitive dynamics that bears argue are already compressing the opportunity.