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Investing.com - JPMorgan upgraded Cars.com (NYSE:CARS) from Neutral to Overweight on Thursday, while maintaining its price target of $14.00. According to InvestingPro data, the stock is currently trading at $12.33, with analysts’ targets ranging from $11 to $25.
The investment bank’s decision comes as it applies an enterprise value to EBITDA multiple of approximately 5.5x on its 2026 EBITDA estimate for the online automotive marketplace.
JPMorgan noted that its target multiple represents a roughly 40% discount relative to its target multiple of approximately 9.5x for competitor CarGurus (NASDAQ:CARG).
The discount reflects Cars.com’s relatively slower growth and margin expansion in recent years compared to its peer.
The bank also considered the typical valuation gap between first and second-ranked players in alternative e-commerce and digital marketplace verticals when determining the appropriate multiple.
In other recent news, Cars.com reported its first-quarter 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company’s EPS was $0.37, falling short of the expected $0.49, while revenue was reported at $179 million, slightly below the forecast of $179.82 million. Despite these financial misses, Cars.com demonstrated resilience with an adjusted EBITDA margin that exceeded expectations at 28.3%. The company also noted a net loss of $2 million for the quarter and has suspended its full-year revenue guidance due to market uncertainties.
In analyst developments, UBS revised its price target for Cars.com from $13.00 to $12.00, maintaining a Neutral rating. Analyst Tom White cited both positive developments, such as an increase in paying dealer growth, and challenges, including first-quarter revenues that fell short of expectations. UBS acknowledged the company’s solid performance in certain areas but recognized potential headwinds, such as macroeconomic factors affecting non-subscription customer spending and no growth in AccuTrade subscriptions.
Additionally, Cars.com has been focusing on strategic initiatives, including product innovation and core initiatives, to drive growth. The company repurchased $22 million in shares, reflecting confidence in its long-term strategy. CEO Alex Fetter emphasized the importance of the company’s platform strategy, which integrates consumer marketplaces with dealer software tools, as a driver of diversified growth. Despite some market uncertainty, Cars.com remains confident in its ability to deliver full-year growth, driven by growth initiatives related to greater product adoption and innovation.
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