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Investing.com - UBS has raised its price target on CarGurus Inc. (NASDAQ:CARG) to $36.00 from $33.00 while maintaining a Neutral rating on the stock. According to InvestingPro data, the company, currently valued at $3.1 billion, appears undervalued based on its Fair Value analysis, with analyst targets ranging from $35 to $44.
The firm cited CarGurus’ competitive positioning against potential threats, including Amazon (NASDAQ:AMZN)’s entry into the used/certified pre-owned vehicle market. UBS noted that CarGurus management respects and monitors this competition but believes the company is well positioned due to its two-sided market approach and established relationships with dealers and customers. The company’s strong position is reflected in its impressive 85.6% gross profit margins and healthy financial metrics, as revealed by InvestingPro’s comprehensive analysis.
UBS also addressed concerns about artificial intelligence tools potentially disrupting car buying. CarGurus has launched its own AI solution called CG Discover AI to assist consumers in their car shopping journey.
The firm highlighted CarGurus’ view that dealer engagement remains a key competitive advantage that would be difficult for horizontal AI agents to replicate. This dealer relationship component represents a significant barrier to entry for potential competitors.
CarGurus management continues to emphasize that a human element remains important in emotional purchasing decisions like buying a car, suggesting that pure technology solutions may not fully replace the current car buying ecosystem. For deeper insights into CarGurus’ AI strategy and financial performance, including 11 additional ProTips and detailed valuation metrics, visit InvestingPro.
In other recent news, CarGurus reported a net income of $22.3 million for the second quarter, with total revenue reaching $234 million, marking a 7% increase year-over-year. The company’s core Marketplace business saw a 14% revenue growth, contributing $222 million to the total. Despite these positive financial results, CarGurus announced plans to wind down its CarOffer transactions business by the end of 2025. In a separate development, the company launched an AI-powered search feature on its platform to enhance the car shopping experience for users. This tool aims to offer a more personalized and intuitive experience for buyers. Analysts from Needham raised their price target for CarGurus to $44, citing strong marketplace monetization potential, while Citizens JMP downgraded the stock to Market Perform due to concerns about growth driven primarily by pricing strategies. Earlier, CarGurus also reported first-quarter 2025 earnings that exceeded expectations, with an earnings per share of $0.46 against a forecast of $0.44. Revenue for this period reached $225 million, slightly below the anticipated $226.73 million.
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