DA Davidson has increased the price target for CarGurus Inc. (NASDAQ: NASDAQ:CARG) to $26.50, up from the previous target of $25.50, while maintaining a Neutral rating on the stock. The adjustment comes amid a mixed outlook for the company's CarOffer platform and its core Marketplace operations.
The firm attributes its Neutral stance on CarGurus' shares to the uncertain timeline for the recovery and growth normalization of CarOffer, which saw its adjusted EBITDA loss widen slightly quarter-over-quarter to $5.7 million. CarGurus also forecasted a marginally larger sequential EBITDA loss for CarOffer in the third quarter.
Despite these concerns, the firm recognizes the momentum in CarGurus' core Marketplace and a positive environment in the broader auto industry, noting factors such as rising inventories and resilient consumer demand, which are expected to continue supporting the stock.
The new price target of $26.50 reflects a valuation of 9.5 times the firm's 2025 enterprise value to EBITDA projection for CarGurus.
CarGurus' revenue surpassed the high end of its guidance at $195 million. BTIG updated its price target for the company to $30.00 and maintained a Buy rating. CarGurus' projection for third-quarter marketplace revenue is between $199-$204 million, indicating potential growth. This performance is attributed to several factors, including the onboarding of new dealers and the upselling of comprehensive subscription packages.
JMP Securities recently upgraded its rating on CarGurus to Market Outperform, based on a positive outlook for the company's marketplace business. RBC Capital Markets also raised the price target for CarGurus to $27.00, maintaining a Market Perform rating. These upgrades are based on recent developments and financial projections for the company.
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