ACVA stock target cut to $22 on softer guidance

On Thursday, Citizens JMP analyst Nicholas Jones adjusted the price target for ACV Auctions Inc (NASDAQ:ACVA), reducing it to $22.00 from the previous $25.00, while maintaining a Market Outperform rating on the company’s shares. This decision came after ACV Auctions reported robust fourth-quarter results, surpassing consensus estimates for both revenue and adjusted EBITDA. Currently trading at $20.65 with a market capitalization of $3.46 billion, InvestingPro analysis suggests the stock is slightly overvalued relative to its Fair Value, though analysts maintain targets ranging from $18 to $28.

Despite the positive performance in the last quarter, ACV Auctions provided guidance for the first quarter of 2025 and the full year that was not as strong as anticipated. Following the announcement, the company’s shares dropped approximately 10% in aftermarket trading. Jones acknowledged the desire for more favorable guidance but also recognized the management’s expectation of 22% top-line growth and a 30% increase in incremental adjusted EBITDA margins for the full year. This outlook suggests ACV Auctions is poised to continue expanding its market share, even with predictions of a flat dealer wholesale market in 2025. InvestingPro data shows the company has maintained strong historical growth with revenue increasing by 29.34% in the last twelve months, though investors should note the stock’s high beta of 1.68 indicates significant volatility.

The company concluded 2024 on a strong note, with significant year-over-year growth in its marketplace. There was a 23% increase in marketplace buyers, totaling 20,975, and a 25% increase in marketplace sellers, reaching 14,377. This growth demonstrates ACV Auctions’ effectiveness in attracting new participants to its platform. Management highlighted that approximately half of U.S. dealers are now conducting transactions through its marketplace, indicating a solid foothold within the industry. InvestingPro reveals additional insights through its comprehensive analysis, including 8 more key tips about ACVA’s financial health and market position. For detailed metrics and expert analysis, check out the full Pro Research Report, available exclusively to InvestingPro subscribers.

Jones’ comments reflect a balance of the immediate challenges faced by ACV Auctions in terms of its guidance for the upcoming periods, with the underlying strength of the business as evidenced by its performance and growth in user base. The revised price target reflects the analyst’s assessment of the company’s future potential in light of the recent developments.

In other recent news, ACV Auctions Inc. reported a strong financial performance for the fourth quarter of 2024, achieving a 35% year-over-year increase in revenue, totaling $160 million. The company has set an optimistic revenue guidance for 2025, projecting growth between 20% and 23%, with expected revenue reaching between $765 million and $785 million. Despite these positive results, the stock experienced a decline in after-hours trading, reflecting investor concerns over potential economic uncertainties. ACV Auctions continues to expand its market share, driven by innovations in AI-powered pricing and inspection platforms, which have been highlighted as key growth areas for the company.

Additionally, the company has projected a 150% improvement in adjusted EBITDA for 2025, targeting between $65 million and $75 million. Analysts have noted that the company’s strong execution in 2024 has positioned it well for future growth, despite a muted outlook for the dealer wholesale market. The company sold 183,000 vehicles in Q4, contributing to a total of 743,000 vehicles for the year, marking a 24% increase. ACV Auctions’ advancements in AI-powered products and services have been emphasized as part of its strategy to enhance value-added services and drive operating efficiencies.

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