7. CarGurus Inc. (NASDAQ:CARG)
Number of Hedge Fund Investors: 32
CarGurus Inc. (NASDAQ:CARG) is a multinational, online automotive platform that facilitates the buying and selling of vehicles. The company offers a comprehensive marketplace that empowers consumers to confidently purchase or sell cars either online or in person. The company provides dealerships with tools to accurately price, market, and quickly sell vehicles, leveraging proprietary technology and data analytics to ensure transparency and competitive pricing. It is one of the most visited automotive shopping sites in the US. The company also operates online marketplaces in Canada and the United Kingdom.
The company is focused on driving future growth by enhancing its platform and services for dealers and consumers. In the second quarter of 2024, the company achieved a 15% year-over-year increase in listings revenue, thanks to strong lead growth and improved traffic conversion rates. CarGurus Inc. (NASDAQ:CARG) has introduced innovative tools like the Next Best Deal Rating, which helps dealers optimize their pricing strategies, resulting in increased vehicle visibility and faster sales. This tool has gained significant traction, with over 9,200 dealers adopting the tool within just 3 quarters of its launch. The company’s newest product Maximize Margin uses data to inform dealers how much they can increase the price of a vehicle without risking their deal ratings.
In the Q2 2024 earnings call, management highlighted that approximately 50% of dealers who have used CarGurus’ services for over a year have increased their spending through add-on products, upgrades, and contract renewals. Notably, 36% of all contracts signed during the quarter were for six months or longer, indicating a strong commitment from dealers. These trends reflect CarGurus Inc.’s (NASDAQ:CARG) growing value to its dealer partners and its ability to enhance customer engagement and satisfaction.
At the same time, the company is actively investing in enhancing its consumer app, which contributed to 28% of its leads. The company has simplified the vehicle search process and personalized the experience for returning users, resulting in a 16% increase in one-month app retention rates. In addition to app improvements, CarGurus Inc. (NASDAQ:CARG) is advancing its AI initiatives to streamline the shopping journey, offering features like conversational search and vehicle recommendations. These efforts have solidified CarGurus’ position as the most visited automotive marketplace, with 56% more visits than its closest competitor.
In Q2 2024, CarGurus Inc. (NASDAQ:CARG) reported consolidated revenue of $219 million, a 9% decline year-over-year, primarily due to lower wholesale and product volumes. However, the company’s marketplace business thrived, achieving $195 million in revenue, which is a 14% increase year-over-year. This growth was driven by a rise in subscription-based listings and the adoption of add-on products, reflecting the company’s strong value proposition for dealers. The company was also able to expand its dealer base by 255 year-over-year, reaching the highest number of paying dealers since early 2020.
The company’s international business remains a key focus area, with revenue increasing by 21% year-over-year in the second quarter, primarily due to the growth of the dealer base.
According to Insider Monkey’s Q2 2024 database, 32 hedge funds held stakes in CarGurus Inc. (NASDAQ:CARG), an increase from 25 hedge funds in Q1 2024. This growth in hedge fund interest reflects a rising confidence in the company’s potential and performance.
With a focus on product innovation and enhancing the consumer experience through AI and app improvements, CarGurus Inc. (NASDAQ:CARG) is well-positioned to capture a larger market share in the automotive sector.
