02. CarGurus, Inc. (NASDAQ:CARG)
Price Reaction after the Upgrade: +1.02(+4.05%)
On June 7, JMP Securities made a significant move within the automotive industry by upgrading CarGurus, Inc. (NASDAQ:CARG) to an “Outperform” rating, signaling a bullish stance on the company’s future prospects. This upgrade came amidst a positive shift in sentiment towards CarGurus, Inc. (NASDAQ:CARG), with the company’s stock price experiencing a notable increase of 4.05% compared to the previous day’s closing price of $26.19. The decision to upgrade CarGurus, Inc. (NASDAQ:CARG) is primarily driven by the normalization of the automotive industry, according to analysts. After facing significant disruption and volatility in recent years due to supply chain issues and economic fluctuations, the car market is now stabilizing. This stabilization is expected to benefit CarGurus, Inc. (NASDAQ:CARG) as it navigates a more predictable and steady market environment. CarGurus, Inc. (NASDAQ:CARG), known for its online automotive marketplace connecting buyers and sellers of new and used cars, is well-positioned to capitalize on this market stabilization. With increased consumer confidence and more stable inventory levels at dealerships, the company’s platform stands to experience higher engagement and transaction volumes. This, in turn, is anticipated to bolster CarGurus, Inc. (NASDAQ:CARG) revenue prospects and drive growth in the coming quarters. The upgrade by JMP Securities reflects confidence in CarGurus, Inc. (NASDAQ:CARG) ability to leverage the improved market conditions to its advantage. As the automotive industry continues to normalize, CarGurus, Inc. (NASDAQ:CARG) is poised to benefit from a more conducive operating environment, further solidifying its position as a leading player in the online automotive marketplace.
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.”
