S&P 500 flirts with fresh record high, but chip-led softness weighs
On Friday, UBS analyst Tom White revised the price target for Cars.com (NYSE: CARS), bringing it down to $12.00 from the previous $13.00, while keeping a Neutral rating on the stock. The stock, currently trading at $10.67, has experienced significant pressure, declining over 15% in the past week. The adjustment follows the company’s first-quarter performance, which White described as having both high points and challenges. According to InvestingPro analysis, the company maintains a "GOOD" overall financial health score, suggesting underlying stability despite recent market volatility.
Cars.com’s first quarter showed some positive developments, such as an increase in paying dealer growth compared to the previous quarter and improving core Marketplace trends in February and March. The company’s EBITDA reached $154 million in the last twelve months, with a healthy gross profit margin of 66.6%. Additionally, the company enjoyed a notable EBITDA upside and early momentum in its DealerClub initiative. However, White noted some areas of concern, including first-quarter revenues that fell short of consensus expectations in both key segments.
The analyst also pointed out potential risks, such as early indications that non-subscription customer spending may decrease due to macroeconomic factors. Furthermore, the company experienced no growth in AccuTrade subscriptions and has decided to suspend its forward guidance, adding to the uncertainties.
Despite the mixed results and the lowered price target, UBS maintains its Neutral stance on Cars.com shares. The firm acknowledges the company’s solid performance in certain areas while also recognizing the potential headwinds it faces. Based on InvestingPro data, the stock appears undervalued, with a strong free cash flow yield and liquid assets exceeding short-term obligations. White’s comments reflect a cautious optimism, tempered by the recognition of the challenges ahead for Cars.com in the current economic climate. For deeper insights into Cars.com’s valuation and 12 additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Cars.com Inc. reported its first-quarter 2025 earnings, which fell short of expectations. The company’s earnings per share (EPS) were $0.37, missing the anticipated $0.49, while revenue was slightly below forecasts at $179 million. Cars.com also reported a net loss of $2 million for the quarter. Despite these financial misses, the company demonstrated resilience with an adjusted EBITDA margin of 28.3%, exceeding expectations. The company has suspended its full-year revenue guidance due to market uncertainties, particularly related to tariffs and production constraints. Analysts from B. Riley Securities and JPMorgan have shown interest in Cars.com’s strategic initiatives, including product adoption and innovation. The company continues to focus on its core initiatives and product innovation, with CEO Alex Fetter emphasizing the importance of its platform strategy. Additionally, Cars.com has repurchased $22 million in shares, reflecting confidence in its long-term strategy.
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