Analysts Are Betting On CarGurus, Inc. (NASDAQ:CARG) With A Big Upgrade This Week

CarGurus, Inc. (NASDAQ:CARG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investors have been pretty optimistic on CarGurus too, with the stock up 35% to US$46.44 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following the upgrade, the most recent consensus for CarGurus from its 13 analysts is for revenues of US$1.6b in 2022 which, if met, would be a substantial 64% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.95 per share this year. Prior to this update, the analysts had been forecasting revenues of US$1.3b and earnings per share (EPS) of US$0.89 in 2022. Sentiment certainly seems to have improved in recent times, with a solid increase in revenue and a small lift in earnings per share estimates.

View our latest analysis for CarGurus

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$44.62, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values CarGurus at US$63.00 per share, while the most bearish prices it at US$35.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that CarGurus' rate of growth is expected to accelerate meaningfully, with the forecast 64% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 23% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect CarGurus to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at CarGurus.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple CarGurus analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.