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On Wednesday, JMP Securities adjusted its outlook on CarGurus Inc. (NASDAQ: NASDAQ:CARG), reducing the price target from $43.00 to $38.00 while retaining a Market Outperform rating. The revision reflects an anticipation of potential challenges in the automotive advertising sector due to economic conditions. According to InvestingPro data, the stock has experienced a 31% decline year-to-date, though analysis suggests the company is currently undervalued based on its Fair Value assessment.
JMP Securities analysts believe CarGurus, esteemed as a leading lead generation platform, is well-positioned to maintain customer loyalty even in a downturn. The firm's analysts expect CarGurus to experience minimal customer attrition, underscoring the company's robust standing in the market. This confidence is supported by CarGurus' impressive 83.7% gross profit margin and strong financial health, with a current ratio of 4.2 indicating excellent liquidity.
The assessment by JMP Securities suggests that while CarGurus is poised to remain a top player, the broader industry could face headwinds. Dealers are predicted to scrutinize their advertising expenditures more closely, and Original Equipment Manufacturers (OEMs) are not expected to increase advertising investments during a recessionary period.
This outlook aligns CarGurus with other market leaders such as Carvana Co. (NYSE: NYSE:CVNA) and ACV Auctions Inc. (NASDAQ: ACVA), which are also anticipated to navigate through market volatility successfully. JMP Securities views these companies as share gainers and industry leaders, indicating a preference for established entities during uncertain economic times.
The price target adjustment for CarGurus by JMP Securities serves as an indicator of the firm's cautious stance on the auto advertising market's near-term prospects while acknowledging the resilience and quality of CarGurus' platform. For a deeper understanding of CarGurus' market position and growth potential, InvestingPro offers comprehensive analysis through its Pro Research Report, one of 1,400+ detailed company analyses available to subscribers.
In other recent news, CarGurus Inc. reported mixed fourth-quarter results for 2024, with total revenue slightly below consensus estimates, while adjusted EBITDA surpassed Wall Street expectations. The company's marketplace revenue was reported at $210 million, narrowly missing analyst estimates but within the company's guidance range. Adjusted EBITDA reached $76 million, beating the expected $75 million, with a strong 35% margin in the marketplace segment. However, CarOffer, a part of CarGurus' business, reported a reduced EBITDA loss of $3 million, showing improvement from previous quarters.
JPMorgan downgraded CarGurus from Overweight to Neutral, citing a challenging cyclical environment and potential pricing slowdowns. Similarly, Citi and BTIG adjusted their price targets to $40, with BTIG maintaining a Buy rating and Citi a Neutral stance. JMP analysts also revised their price target to $43, maintaining a Market Outperform rating despite mixed earnings results.
CarGurus also announced a leadership change, with CFO Elisa Palazzo stepping down in March 2025, and CEO Jason Trevisan assuming additional financial roles until a new CFO is appointed. The company continues to focus on product development and international expansion, with analysts closely monitoring the impact of these strategic investments.
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