The COVID-19 pandemic significantly disrupted CarGurus, Inc. (CARG) and took a toll on its revenues in 2020. The easing of pandemic-led restrictions, along with business transformation initiatives are providing major boosts to revenues and margins in 2021.
CarGurus, an online marketplace to buy and sell vehicles, delivered strong Q2 financials on August 5, that blew past the Street’s estimates. Its revenues jumped 130% year-on-year to $217.7 million, handily surpassing the consensus estimate of $190.3 million. The outperformance came on the back of higher subscription revenues. (See CarGurus stock charts on TipRanks)
Its adjusted income of $0.41 a share more than doubled from the prior-year period and came well ahead of the Street’s estimate of $0.25 per share.
CarGurus’ key performance metrics also improved in Q2. Its quarterly average revenue per subscribing dealer (QARSD) in the U.S. increased by 82% year-over-year to $5,550. Furthermore, its total number of paying dealers improved both in the U.S. and International markets.
CarGurus stock has risen about 15% since July. However, it is still trading in the red; down approximately 3% in 2021.
Nevertheless, TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on CarGurus stock, with 15.6% of investors who hold portfolios on TipRanks having increased their exposure in the last 30 days.
Acknowledging the company’s improving prospects, Chris Pierce of Needham turned positive on CarGurus stock. Pierce upgraded CarGurus to a Buy from a Hold with a price target of $38, implying 23.6% upside potential.
Pierce believes that its subscription-based business deserves more credit, while he is upbeat about the company’s January acquisition of CarOffer.
The analyst summed up by saying, “We are positive on CarOffer’s ability to keep CARG front of mind in the dealer community and drive higher revenues through new conversions and higher retention, and adopt a positive view towards a fully digital CARG solution, given its traffic share in the U.S.”
Along with Pierce, the majority of the Street is also bullish on CARG. The company’s Strong Buy consensus rating is based on four Buys and one Hold. The average CarGurus price target of $36.80 implies 19.7% upside potential to current levels.
Disclosure: Amit Singh held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
