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On Friday, CarGurus Inc. (NASDAQ:CARG) experienced a downturn in aftermarket trading, with shares falling approximately 7%. This movement followed an announcement from JMP analysts, specifically Nicholas Jones, who lowered the price target for the company to $43.00 from the previous $46.00. Despite this adjustment, the firm maintained a Market Outperform rating on the stock. According to InvestingPro data, CarGurus has demonstrated strong performance with a 64% return over the past year, maintaining impressive gross profit margins of 83%.
The reduction in CarGurus’ price target came after the company reported its fourth-quarter results, which presented a mixed picture. Revenue for the quarter came in slightly below the consensus estimates, although adjusted EBITDA surpassed the expectations set by Wall Street. The company’s first-quarter guidance for 2025 also showed mixed signals, with projected revenue at the midpoint falling short of consensus, largely attributed to ongoing pressures within its CarOffer segment. Nonetheless, the midpoint adjusted EBITDA forecast was ahead of Street estimates. InvestingPro analysis reveals the company maintains a strong financial position with a current ratio of 4.2 and more cash than debt on its balance sheet. For deeper insights, InvestingPro subscribers have access to 13 additional ProTips and comprehensive financial metrics.
JMP analysts pointed out that while CarGurus’ marketplace guidance was modestly below consensus at the midpoint, the company’s business trends are considered durable. The Digital Wholesale segment, however, continues to present challenges. Throughout 2024, CarGurus’ marketplace business saw acceleration in each quarter, with year-over-year margin expansion. Management has indicated that these robust trends are expected to continue into the early part of 2025, although there is an anticipation of growth deceleration in the second half of the year due to tougher comparisons.
The analysts at JMP remain optimistic about the future of CarGurus’ marketplace business, anticipating continued positive momentum as the company further refines the product-market fit for its Digital Wholesale segment. Despite the near-term headwinds and the lowered price target, the overall outlook for CarGurus remains positive according to JMP’s assessment.
In other recent news, CarGurus reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.55, compared to the forecasted $0.52. However, the company’s revenue fell short of expectations, coming in at $229 million against a forecast of $231.85 million. CarGurus experienced a 2% year-over-year increase in consolidated revenue, with marketplace revenue growing by 15%. Despite these gains, the Digital Wholesale segment ended the year with an $18 million adjusted EBITDA loss, indicating ongoing challenges in that area. CarGurus has outlined plans for continued investment in international markets and AI integration to drive future growth. In terms of analyst activity, no specific upgrades or downgrades were mentioned, but the company did face a notable stock decline after the earnings announcement. Looking ahead, CarGurus has provided guidance for Q1 2025, projecting consolidated revenue between $216 million and $236 million. The company remains focused on product innovation and expanding its international presence.
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