7. CarGurus, Inc. (NASDAQ:CARG)
Number of Hedge Fund Holders: 29
CarGurus, Inc. (NASDAQ:CARG) is one of the best auto and truck dealership stocks to invest in. It operates one of the most visited online platforms that helps people buy and sell cars. The company functions through two main areas U.S. Marketplace and Digital Wholesale. It has a presence in the United States, Canada, and the United Kingdom.
The popularity and user traction the company generates from its online platform is one of its prominent competitive edges. During the fiscal third quarter of 2024, CarGurus, Inc. (NASDAQ:CARG) reached 42 million global monthly unique visitors, which as per management’s statistics is 58% more than its closest competitor. User engagement on its platform resulted in a 15% year-over-year growth in listings revenue. Management has been constantly updating its platform for more data-driven functionality and insights. It recently introduced several new reports such as the Next Best Deal Rating and Acquisition Insights report, which have been well-received by dealers. Nearly half of eligible dealers in the US are utilizing these insights, resulting in significant price adjustments based on recommendations.
CarGurus, Inc. (NASDAQ:CARG) expanded its Marketplace revenue by double-digit year-over-year growth for the third consecutive quarter. Fiscal third quarter 2024 Marketplace revenue for the company came in at $204 million, indicating a 15% increase. Management attributed revenue growth to new dealer ads globally, migration towards higher subscription tiers, and greater adoption of value-added products and services.
Meridian Small Cap Growth Fund stated the following regarding CarGurus, Inc. (NASDAQ:CARG) in its fourth quarter 2023 investor letter:
“CarGurus, Inc. (NASDAQ:CARG) is at the forefront of the online automobile sales industry, operating a web-based retail marketplace and holding a 50% stake in an online auction wholesaler. The marketplace business is unique in that it presents buyers with an unbiased list of available vehicles ranked on their value— a combination of the price and quality of the vehicle. Meanwhile, dealers are drawn to CarGurus.com’s attractive pricing and extensive suite of ancillary services. During the quarter, the stock appreciated as the company reported accelerating marketplace growth, up 8% from 4% in the previous quarter. The acceleration was primarily driven by rising inventory on dealer lots, which is forcing dealers to advertise to stimulate demand for the first time post-COVID. CarGurus also has been successful in passing through price increases, as price breaks provided during COVID are coming off the books and the company is the lowest cost source of leads for dealers. The company announced during the quarter that it would be buying the remaining stake in CarOffer, its auction-based wholesaling business. We believe the price, which is based on a depressed 2023 valuation, provides excellent value for CarGurus shareholders. We continue to believe in the long-term fundamentals of the company and maintained our position during the quarter.”
