Last Update 10 Dec 25

CARG: Marketplace Resilience And Buybacks Will Support Balanced Medium Term Upside

Analysts have modestly raised their price target on CarGurus, citing slightly faster expected revenue growth, a small improvement in long term profit margins, and resilient marketplace dynamics as Amazon Autos evolves toward a listings style model. This brings the implied fair value closer to about $40 per share.

Analyst Commentary

Street research around Amazon Autos and adjacent used vehicle platforms is shaping how investors think about CarGurus' competitive positioning, valuation, and medium term growth trajectory.

Bullish analysts interpret the recent developments in the online auto marketplace as broadly supportive of CarGurus' business model, though they also flag execution and competitive risks that could limit upside if not managed carefully.

Bullish Takeaways

Bullish analysts view Amazon Autos' current third party, listings style approach as validation of CarGurus' marketplace model. This supports confidence that the company can continue to monetize its dealer and consumer traffic without radically altering its strategy.
The expectation that any meaningful impact on pure play used car dealers' unit volumes may not materialize until at least the second half of 2026 suggests that the broader online auto ecosystem remains in a transition phase. This gives CarGurus time to refine products, deepen dealer relationships, and improve monetization, which underpins higher medium term revenue growth assumptions.
Reports that Amazon's selection remains limited and geographically constrained lead bullish analysts to conclude that traditional listings platforms should remain primary discovery channels for many shoppers in the near term. This supports estimates for resilient marketplace engagement and incremental margin expansion.
The perception that some competitors' current guidance may be conservative reinforces the idea that investor expectations for digital auto retail volumes could reset higher over the next 12 to 24 months. This in turn helps justify modest multiple expansion for CarGurus as sentiment toward the category improves.

Bearish Takeaways

Bearish analysts caution that the potential national expansion of high profile partnerships on Amazon Autos could eventually compress pricing power for listings sites, as dealers gain more negotiating leverage across a broader set of channels. This may cap upside to CarGurus' long term margin assumptions.
The delayed timing of any impact on competing platforms' unit sales means competitive pressures could emerge just as investors expect CarGurus to harvest operating leverage. This creates a risk that valuation embeds too smooth a trajectory for revenue growth and profitability beyond 2026.
Concerns persist that as Amazon Autos scales inventory and improves user experience, consumer discovery behavior could gradually shift toward more vertically integrated ecosystems. This could force CarGurus to increase product investment and marketing spend to defend share, which would pressure free cash flow conversion.
Some investors remain wary that the market may be underestimating long term structural changes in online auto retail. They see downside risk if CarGurus fails to differentiate its value proposition from both emerging marketplaces and traditional classifieds, potentially limiting multiple expansion even if near term fundamentals remain solid.

What's in the News

Launched PriceVantage, a used vehicle pricing solution that uses more than 10 billion monthly shopper intent signals to deliver real time, VIN level pricing recommendations tailored to individual dealers' markets and goals, aiming to improve turn times and profitability (Key Developments).
Integrated PriceVantage into dealers' existing workflows with Inventory Management System syndication, automatic deal rating updates, and a Chrome extension to reduce manual updates across platforms and operational friction (Key Developments).
Reported strong early adoption of data driven dealer tools, with nearly 20,000 dealers across North America and the U.K. using Dealer Data Insights reports by the end of Third Quarter 2025, and engaged PriceVantage users seeing materially faster turn times and higher shopper connections (Key Developments).
Completed repurchases of 9,164,088 shares, or about 8.97% of shares outstanding, for $295.23 million under the buyback program announced on November 7, 2024, including 3,233,649 shares bought in the third quarter of 2025 (Key Developments).
Issued guidance for Marketplace revenue of $236 million to $241 million for the fourth quarter of 2025 and $902 million to $907 million for full year 2025, setting expectations for near term growth (Key Developments).

Valuation Changes

Fair Value: Unchanged at approximately $40.29 per share, reflecting a stable central estimate of intrinsic value.
Discount Rate: Fallen slightly from 8.38% to about 8.36%, implying a modestly lower perceived risk profile or cost of capital.
Revenue Growth: Risen slightly from roughly 6.73% to 6.73% annually, indicating a marginally more optimistic view on top line expansion.
Net Profit Margin: Risen slightly from about 26.79% to 26.86%, suggesting a small improvement in expected long term profitability.
Future P/E: Fallen slightly from 12.92x to about 12.88x, indicating a minimally lower multiple applied to forward earnings despite stable fair value.

Expanding AI-driven analytics, digital retail solutions, and global partnerships are strengthening user engagement, dealer retention, and opening substantial growth opportunities beyond North America.
Sharpened focus on high-margin technology and scalable offerings, combined with winding down volatile operations, is driving improved profitability, operational efficiency, and marketplace differentiation.
Strategic retreat from wholesale, rising digital competition, limited international reach, regulatory challenges, and shifts in mobility trends threaten CarGurus' long-term growth and market relevance.

Catalysts

About CarGurus

Operates an online automotive platform for buying and selling vehicles in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Expansion and deeper adoption of data-driven analytics tools and AI-powered solutions across the dealer base are creating higher engagement, improved retention, and more actionable insights, which are expected to drive sustained Marketplace revenue growth and support increasing margins as dealers see measurable ROI and make CarGurus central to their workflow.
Momentum in international markets (Canada and UK), evidenced by strong dealer additions, product adoption, and exclusive partnerships, expands CarGurus' total addressable market and provides a long runway for revenue and earnings growth outside North America, supporting long-term scalability.
Success in digital retailing, including Digital Deal features (financing, appointments, deposits) and seamless online-to-offline transaction enablement, positions CarGurus to capture increasing consumer demand for online automotive transactions, leading to stronger monetization, higher-quality leads, and improved revenue per user.
Strategic wind-down of low-margin, volatile wholesale transaction operations (CarOffer), with renewed focus on proprietary technology, analytics, and sourcing intelligence, is expected to improve overall net margins and sharpen operational focus on high-performing, scalable business lines.
Leveraging brand trust, scale, and consumer engagement through personalized, AI-enhanced shopping experiences and omni-channel dealer integration increases user stickiness and differentiation in a consolidating digital automotive marketplace, supporting long-term growth in revenue, market share, and profitability.

CarGurus Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming CarGurus's revenue will grow by 5.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 14.1% today to 29.2% in 3 years time.
Analysts expect earnings to reach $316.9 million (and earnings per share of $3.19) by about September 2028, up from $129.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $441.5 million in earnings, and the most bearish expecting $182.2 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.4x on those 2028 earnings, down from 27.1x today. This future PE is lower than the current PE for the US Interactive Media and Services industry at 16.9x.
Analysts expect the number of shares outstanding to decline by 4.29% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.14%, as per the Simply Wall St company report.

CarGurus Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The wind-down of CarOffer, CarGurus' instant trade transaction and wholesale business, exposes an inability to profitably scale in the low-margin, high-volatility wholesale segment. This retreat signals strategic risk as the car market increasingly shifts to end-to-end digital transaction models, which may limit revenue diversification and growth opportunities in the long term.
Rising competition from OEM and dealer digital platforms, as well as large-scale retailers (including Amazon's entry into used and CPO cars), threatens CarGurus' marketplace dominance, potentially pressuring take rates, margin structure, and future revenue growth.
Difficulty in expanding outside North America-with current international focus just on Canada and the U.K.-limits the company's addressable market, and intensifying market saturation domestically may decelerate future Marketplace revenue and earnings expansion.
The rapidly evolving regulatory landscape regarding online data usage, privacy, and digital marketing could increase compliance costs and constrain CarGurus' ability to efficiently acquire customers, thereby impacting operating expenses and potentially compressing net margins.
Shifts in mobility, including increased urbanization, adoption of shared transportation, and direct-to-consumer models from automakers, may reduce personal vehicle ownership rates over time, shrinking CarGurus' long-term total addressable market and putting downward pressure on revenue growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $38.667 for CarGurus based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $44.0, and the most bearish reporting a price target of just $33.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $316.9 million, and it would be trading on a PE ratio of 13.4x, assuming you use a discount rate of 8.1%.
Given the current share price of $35.38, the analyst price target of $38.67 is 8.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Dealer Network Expansion And Premium Tier Adoption Will Drive Future Performance