In a report released today, Chris Pierce from Needham reiterated a Buy rating on CarGurus (CARG – Research Report), with a price target of $24.00.
Chris Pierce has given his Buy rating due to a combination of factors impacting CarGurus’s financial landscape and market position. The solid performance of CarGurus’s core dealer marketplace lead generation business provides a stable foundation for the stock. Additionally, there’s an attractive valuation based on current multiples that suggest the stock may be undervalued. Pierce notes that there’s an expected acceleration in quarterly revenue per subscribing dealer (QARSD), alongside favorable upcoming comparisons in the first half of 2024, which further bolsters the investment case for CarGurus.
While the trajectory of earnings growth beyond the high-single to low-double-digit (HSD/LDD) growth currently implied by QARSD remains uncertain, there are positive indications for the future. CarGurus is in a period of optimization for its wholesale business, with growth anticipated to pick up in 2025. Pierce is also optimistic about the potential synergies between CarGurus’s retail and wholesale branches that could benefit dealerships. Despite lowering the wholesale revenue estimate for 2024 and adjusting the timeline for growth, the price target has been raised to $24, indicating confidence in the stock’s long-term value and representing a multiple of 10 times the adjusted 2025 earnings estimate.
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CarGurus (CARG) Company Description:
Cargurus, Inc. engages in the provision of online auto shopping. It offers proprietary technology, search algorithms, and innovative data analytics to analyze new and used car listings. The firm operates through the following segments: United States and International. The United States segment derives revenues from marketplace subscriptions, advertising services, and other revenues from customers within the United States. The International segment includes the revenues from marketplace subscriptions, advertising services, and other revenues from customers outside of the United States. The company was founded by Langley Steinert in 2006 and is headquartered in Cambridge, MA.
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