CarGurus Exceeds Q1 Expectations: A Buoyant Outlook with Revenue Growth and Operational Efficiency

Analyst Marvin Fong from BTIG maintained a Buy rating on CarGurus (CARG – Research Report) and keeping the price target at $28.00.

Marvin Fong’s rating is based on the strong performance of the CarGurus marketplace, which exceeded expectations in the first quarter of fiscal year 2024, coupled with positive developments in international growth and dealer engagement. The marketplace’s revenue surpassed analyst predictions, and the increase in average revenue per subscriber dealer (QARSD) highlighted the company’s ability to add new dealers and upgrade existing ones to higher subscription tiers, each step of which significantly boosts pricing. Despite challenges in consumer finance and advertising sectors, CarGurus expressed confidence in future advertising revenue growth.

Furthermore, Fong sees potential in CarGurus’ ancillary services like CarOffer and CG Buy Online, which are poised to contribute to growth in the near future. The operational efficiency reflected in lower-than-expected sales and marketing spending, along with the company’s prospects of reducing such expenses, reinforces the optimistic outlook. Adjustments to the fiscal year 2024 revenue and EBITDA estimates reflect a cautious yet positive stance on CarGurus’ core business strength, supporting the Buy rating and a price target that takes into account both the marketplace’s projected EBITDA and the anticipated contributions from CarOffer.

Fong covers the Consumer Cyclical sector, focusing on stocks such as Etsy, Mercadolibre, and CarGurus. According to TipRanks, Fong has an average return of -8.3% and a 37.02% success rate on recommended stocks.

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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.