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Investing.com - Needham has raised its price target on CarGurus Inc. (NASDAQ:CARG) to $44.00 from $39.00 while maintaining a Buy rating, citing strong marketplace monetization potential. The new target represents significant upside from the current stock price of $31.41, with analyst targets ranging from $33 to $42.
The research firm highlighted CarGurus’ robust dealer count growth and accelerating adoption of premium tiers as key factors supporting the price target increase following the company’s second-quarter earnings report. According to InvestingPro data, the company maintains impressive gross profit margins of 85.6% and shows strong financial health metrics.
Needham also noted potential early traction in new vehicle lead generation as an additional growth driver for the automotive marketplace platform.
While acknowledging that competitive risk from Amazon (NASDAQ:AMZN) remains an overhang for CarGurus, Needham believes the strength of the core platform, high-margin recurring revenue, and visible growth levers support a favorable risk/reward profile.
The $44 price target represents approximately 12.5 times enterprise value to Needham’s 2026 estimated adjusted EBITDA, which the firm characterized as conservative estimates compared to CarGurus’ current growth profile.
In other recent news, CarGurus reported a second-quarter net income of $22.3 million and total revenue of $234 million, marking a 7% increase year-over-year. This growth was primarily driven by a 14% rise in its core Marketplace business revenue, totaling $222 million. The company announced plans to wind down its CarOffer transactions business by the end of 2025. In the first quarter of 2025, CarGurus surpassed earnings expectations with an EPS of $0.46, while its revenue slightly missed forecasts at $225 million compared to the anticipated $226.73 million.
Additionally, Citizens JMP downgraded CarGurus from Market Outperform to Market Perform, expressing concerns about the company’s growth trajectory, which they believe relies heavily on pricing or package upsells rather than expanding its dealer base. In a move to enhance user experience, CarGurus introduced an AI-powered search feature designed to improve the car shopping process. This new tool allows users to engage in a conversational search, aiming to make the car buying process more efficient and personalized. These developments reflect CarGurus’ ongoing efforts to adapt and innovate in the digital automotive marketplace.
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