CarGurus (CARG) Surges on Strong Q3 Results and Dealer Expansion but What Fuels Its Growth Narrative?

• CarGurus, Inc. recently reported its third-quarter 2025 earnings, revealing US$238.7 million in revenue and net income of US$44.72 million, both higher than the same period last year, along with optimistic guidance for the next quarter and full year.
• Strong international performance, increased dealer upgrades, and the launch of new AI-powered tools supported marketplace revenue growth and accelerated the company's addition of nearly 2,000 new paying dealers during the quarter.
• We'll examine how CarGurus' better-than-expected earnings and dealer growth impact its investment narrative and future prospects.

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CarGurus Investment Narrative Recap

To be a CarGurus shareholder, you need confidence in its ability to scale its core digital marketplace while maintaining strong dealer relationships, expanding internationally, and leveraging new technology. The Q3 2025 earnings beat and robust paying dealer growth directly support the most important near-term catalyst, wider dealer adoption of AI-powered tools and analytics, but do not materially reduce key competitive threats from large retailers and OEMs moving into the online car market.

Among recent announcements, the rollout of PriceVantage, CarGurus' AI-powered pricing tool, stands out as relevant. Its early success in improving inventory turnover showcases how product innovation is central to the company's growth story and to capturing more value from existing and new dealers, a vital factor given the increasingly competitive digital auto market.

In contrast, heightened competitive pressure from established auto retailers and new digital entrants could limit CarGurus’ ability to sustain margin expansion and...

Read the full narrative on CarGurus (it's free!)

CarGurus' narrative projects $1.1 billion revenue and $316.9 million earnings by 2028. This requires 5.7% yearly revenue growth and an earnings increase of $187.1 million from the current earnings of $129.8 million.

Uncover how CarGurus' forecasts yield a $39.75 fair value, a 19% upside to its current price.

Exploring Other Perspectives

Six fair value estimates from the Simply Wall St Community range from US$39.75 up to US$152.39 per share. With marketplace revenue rising and competition intensifying, your outlook may shift as these diverse views reveal alternate expectations for CarGurus’ future performance.

Explore 6 other fair value estimates on CarGurus - why the stock might be worth over 4x more than the current price!

Build Your Own CarGurus Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your CarGurus research is our analysis highlighting 3 key rewards that could impact your investment decision.
• Our free CarGurus research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate CarGurus' overall financial health at a glance.

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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.

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