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CarGurus Inc (CARG)
NASDAQ:CARG
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CarGurus
(NASDAQ:CARG)
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Rating:66Neutral
Price Target:
$35.00
▲(13.05% Upside)
Action:ReiteratedDate:02/24/26
Solid score driven primarily by strong financial performance (profitability and cash flow) and constructive earnings guidance for double-digit growth, partially offset by weak technicals (price below key moving averages with negative MACD) and only moderate valuation support.
Positive Factors
Free cash flow generation
Sustained, high free cash flow and strong cash conversion (FCF roughly matching net income and OCF ~2.9x net income) create durable financial flexibility. This supports buybacks, disciplined capital allocation and reinvestment without heavy reliance on external financing over the medium term.
High margins and profitability rebound
Very high gross margins and a sharp profitability rebound indicate strong platform economics and operating leverage. Durable margin structure provides resilience to cyclical headwinds and funds product development and shareholder returns while the business scales.
Dealer growth and international acceleration
Rising dealer count, international expansion and higher add‑on product adoption create network effects and diversified revenue pools. A larger, more engaged dealer base supports recurring subscription and performance revenue, making growth less reliant on one market or pricing alone.
Negative Factors
Top-line stagnation / recent revenue declines
Two consecutive years of revenue decline undermine sustainability of margin gains and cash generation. Long‑term durability depends on successful monetization of new products and dealer adoption; persistent revenue weakness would erode the operating cushion even if margins remain elevated.
Reduced balance-sheet cushion and higher leverage
Higher leverage and a materially smaller equity base increase financial sensitivity to earnings shocks. While debt levels remain manageable, reduced equity and rising leverage limit flexibility for large M&A, extended reinvestment cycles or weaker cash flow periods without raising cost of capital.
Planned margin compression and execution risk from product monetization
Management's deliberate reinvestment will compress margins, and monetization hinges on rapid adoption of newly launched products and nascent AI features. If adoption or AI monetization lags, margin compression could persist and strain the free cash flow cushion despite current strong FCF.
CarGurus (CARG) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.95B
Dividend YieldN/A
Average Volume (3M)1.50M
Price to Earnings (P/E)23.4
Beta (1Y)1.16
Revenue Growth4.21%
EPS GrowthN/A
CountryUS
Employees1,282
SectorConsumer Cyclical
Sector Strength84
IndustryAuto - Dealerships
Share Statistics
EPS (TTM)0.63
Shares Outstanding80,972,900
10 Day Avg. Volume1,588,023
30 Day Avg. Volume1,503,688
Financial Highlights & Ratios
PEG Ratio0.03
Price to Book (P/B)9.77
Price to Sales (P/S)3.89
P/FCF Ratio12.65
Enterprise Value/Market Cap1.04
Enterprise Value/Revenue3.26
Enterprise Value/Gross Profit3.66
Enterprise Value/Ebitda11.80
Forecast
1Y Price Target
$37.17Price Target Upside20.06% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
EPS Forecast (FY)2.53
Revenue Forecast (FY)$1.01B
CarGurus Business Overview & Revenue Model
Company DescriptionCarGurus, Inc. operates an online automotive platform for buying and selling vehicles in the United States and internationally. It operates through two segments, U.S. Marketplace and Digital Wholesale. The company provides an online automotive marketplace that allows customers to search for new and used car listings from its dealers; and connects dealers to a large audience of informed and engaged consumers while providing dealers with actionable data-based insights. It also offers Digital Deal which allows shoppers to start purchase from a VDP on eligible listings that provides them with purchase options; Finance in Advance, where eligible consumers can pre-qualify for financing on cars from dealerships that offer financing from partners; Sell My Car Top Dealer Offers which allows dealers to make tailored trade-in offers; and Sell My Car Instant Max Cash Offer which allows consumers to sell vehicles to dealers online. In addition, the company provides dealer listings and data insights products; auto manufacturers and others advertiser products, such as brand reinforcement, category sponsorship, automobile segment exclusivity, and consumer segment exposure; Autolist, an online automotive marketplace through mobile applications and a website; and PistonHeads which is an automotive marketplace, auction platform, and editorial site for automotive enthusiasts. The company was formerly known as CarGurus LLC and changed its name to CarGurus, Inc. in June 2015. CarGurus, Inc. was founded in 2005 and is headquartered in Boston, Massachusetts.
How the Company Makes MoneyCarGurus primarily makes money by selling subscription-based and performance-oriented products to auto dealers and other vehicle sellers that list inventory and advertise on its marketplace. A key revenue stream is dealer subscriptions/advertising packages that provide enhanced listings, prominence in search results, and lead generation tools designed to connect dealers with in-market shoppers. The company also generates revenue from ancillary marketplace products and services tied to automotive retail transactions, which may include technology and dealer tools that support digital retailing workflows and conversion (exact product-level revenue splits not provided here). In addition, CarGurus can earn revenue through arrangements where it receives fees for referrals or leads delivered to third parties involved in auto buying (for example, financing or other transaction-related partners) when such programs are offered; if specific partner names, fee rates, or contribution by program are not publicly specified in this response, those details are null.
CarGurus Key Performance Indicators (KPIs)
Any
Paying Dealers by Geography
Shows the distribution of paying dealers across different regions, highlighting market penetration and potential areas for expansion or increased competition.
Shows the distribution of paying dealers across different regions, highlighting market penetration and potential areas for expansion or increased competition.
Data provided by:
The Fly
The FlyCarGurus Earnings Call Summary
Earnings Call Date:Feb 19, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 07, 2026
Earnings Call Sentiment Positive
The call emphasized broad-based, multi-quarter growth — including mid-teens revenue growth, strong adjusted EBITDA expansion, accelerating international performance, increasing dealer adoption and a slate of AI-driven product launches with early strong engagement. Management also announced disciplined capital returns. The primary negatives are near-term margin compression due to planned reinvestment, higher operating expenses in Q4, discrete CarOffer wind-down costs and that AI-driven discovery remains a small portion of traffic today. Overall, the positives (revenue and profitability growth, product traction, dealer and international momentum, and cash returns) materially outweigh the lowlights tied to purposeful reinvestment and early-stage AI monetization.Q4-2025 Updates
Positive Updates
Strong Revenue Growth
Full year 2025 revenue of $907M, up 14% year-over-year; Q4 2025 revenue of $241M, up 15% year-over-year and at the high end of guidance.
Material Adjusted EBITDA and Profitability Expansion
Full year 2025 non-GAAP adjusted EBITDA grew 25% year-over-year to $319M with adjusted EBITDA margin up ~310 basis points to 35%; Q4 non-GAAP adjusted EBITDA grew 13% year-over-year to $88M.
International Acceleration
International revenue grew 27% for full year 2025 and 32% in Q4 2025 year-over-year; international QARSD grew 16% in Q4 and international dealer count rose 14% year-over-year to 8,360 dealers.
Dealer Growth, Engagement and Monetization
Global paying dealer count increased by 2,399 in 2025; U.S. added 1,357 paying dealers year-over-year in Q4; consolidated QARSD grew 8% year-over-year; add-on product adoption rose nearly 25% year-over-year.
Product and AI-Led Innovation with Early Traction
Launched more products in 2025 than prior years (PriceVantage, CG Discover, Dealership Mode). PriceVantage users execute 66% more price changes vs prior free tool and ~80% of adopting dealers are active weekly. CG Discover traffic grew 3.5x and leads grew 10x quarter-over-quarter; Discover users spend 4.4x more time than regular visitors and average session time rose nearly 20%.
Digital Deal and Transactional Momentum
Digital Deal scaled to 13,500 dealers globally (up ~3,800 YoY). Digital Deal leads with high-value actions rose 78% year-over-year and comprised ~70% of Digital Deal leads; financing-related leads grew 86% year-over-year. Digital Deal leads convert up to 4.7x higher than standard marketplace leads.
Consumer Reach and App Strength
CarGurus maintained leadership as the #1 most visited U.S. automotive marketplace; direct visits up 16% year-over-year, impressions up 50% year-over-year, and the app contributed 34% of leads. CarGurus was #1 car shopping app in 2025 by downloads, MAUs and time spent.
Capital Return and Strong Cash Generation
Ended 2025 with $191M cash (up $12M QoQ); repurchased ~$350M of shares in 2025 and ~$721M since Q4 2022 (~25% of shares). Board authorized a new $250M share repurchase program through Dec 31, 2026.
Negative Updates
Near-term Margin Compression from Investments
Guidance for 2026 anticipates full-year adjusted EBITDA margins compressing ~1.5 to 2.5 percentage points versus 2025 as the company increases investment in product, technology and AI product introductions.
Q4 Margin and Expense Pressures
Q4 non-GAAP gross margin fell about 90 basis points year-over-year to 92%; Q4 adjusted EBITDA margin was ~60 basis points lower year-over-year. Non-GAAP operating expenses increased 15% in Q4 (to $141M) driven by higher S&M and product investments.
CarOffer Wind-Down Costs
Completed CarOffer wind down in Q4 2025, incurring and paying $13.3M in total expenditures (including $5.4M one-time cash restructuring charges), a discrete cost though at the low end of prior estimates.
AI Discovery Still Early and Small in Mix
Management noted AI-driven traffic remains a small share of overall traffic today despite strong growth in Q4; AI is additive but has not yet displaced traditional channels and monetization from AI is nascent.
Reliance on Continued Product Adoption to Sustain Growth
Company expects newly monetized dealer products launched in 2025 to grow ~15x in 2026 and reach 8-figure revenue levels, implying substantial reliance on rapid adoption to drive future revenue targets.
Unit Price Leverage Limited
Management indicated price increases are a modest contributor to QARSD growth and unit pricing is not a major lever versus upgrades, add-ons and volume—potentially limiting quick top-line upside from pricing alone.
Company Guidance
CarGurus guided Q1 2026 revenue of $240.5M–$245.5M (up 13%–16% YoY), non‑GAAP adjusted EBITDA of $72M–$80M (up 5%–16% YoY), non‑GAAP EPS of $0.52–$0.58, diluted weighted‑average shares of ~94M, and noted ~ $1M of ongoing quarterly CarOffer expense will be absorbed; for full‑year 2026 they expect revenue growth of 10%–13% YoY (against 2025 revenue of $907M, implying roughly $998M–$1,026M) and forecast non‑GAAP adjusted EBITDA margin compression of ~1.5–2.5 percentage points versus 2025 (2025 adj. EBITDA margin was ~35%, implying ~32.5%–33.5% in 2026), with management saying the midpoint of Q1 guidance is a reasonable proxy for the first three quarters and Q4 margins should be higher seasonally.CarGurus Financial Statement Overview
Summary
Strong overall quality driven by a sharp 2025 profitability rebound and excellent cash generation (free cash flow ~$289M with solid conversion). Offsetting factors are slightly declining revenue in 2024–2025 and a less conservative balance sheet as equity fell and leverage rose.Income Statement
Profitability improved sharply in 2025 (annual), with net income rising to ~$156M from ~$21M in 2024 and net margin expanding to ~17% from ~2%. Gross profitability is very strong (gross margin ~93% in 2025) and EBITDA margin improved to ~25%. The key weakness is growth: revenue was slightly down in 2024 and declined again in 2025 (about -2%), showing top-line stagnation despite strong margin recovery.78
Positive
Balance Sheet
Leverage looks manageable with debt at ~$191M and a moderate debt-to-equity level (~0.51 in 2025), but it has risen versus 2022–2024 when leverage was lower. Equity declined from ~$617M (2023) to ~$374M (2025), which reduces balance-sheet cushion. Returns improved significantly in 2025 (return on equity ~42%), but the higher leverage and lower equity base increase sensitivity if profitability cools.66
Positive
Cash Flow
Cash generation is a clear strength: operating cash flow increased to ~$295M in 2025 with free cash flow of ~$289M, and free cash flow growth accelerated meaningfully (about +15% in 2025). Cash conversion is solid, with free cash flow roughly matching reported earnings (free cash flow to net income ~0.98) and operating cash flow running well ahead of net income (about 2.9x). The main watch item is variability over time (notably weaker cash generation in 2021 and 2023), though the last two years show strong momentum.86
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 938.98M | 894.38M | 914.24M | 1.66B | 951.37M |
| Gross Profit | 835.54M | 738.95M | 651.45M | 657.55M | 657.36M |
| EBITDA | 235.11M | 173.27M | 81.10M | 167.76M | 200.01M |
| Net Income | 155.90M | 20.97M | 31.10M | 193.78M | 109.24M |
Balance Sheet | |||||
| Total Assets | 661.90M | 824.54M | 918.93M | 927.10M | 931.57M |
| Cash, Cash Equivalents and Short-Term Investments | 190.52M | 304.19M | 312.09M | 469.52M | 321.94M |
| Total Debt | 190.83M | 192.74M | 194.39M | 66.42M | 70.70M |
| Total Liabilities | 287.70M | 282.85M | 302.07M | 155.74M | 251.93M |
| Stockholders Equity | 374.20M | 541.69M | 616.85M | 734.61M | 516.84M |
Cash Flow | |||||
| Free Cash Flow | 288.90M | 180.32M | 83.32M | 238.84M | 84.42M |
| Operating Cash Flow | 295.28M | 255.49M | 124.53M | 256.11M | 98.29M |
| Investing Cash Flow | -29.32M | -72.97M | -61.56M | 72.73M | -68.15M |
| Financing Cash Flow | -383.76M | -168.63M | -253.64M | -92.62M | 17.81M |
CarGurus Technical Analysis
Negative
30.96
Price Trends
32.63
Negative
34.35
Negative
34.09
Negative
Market Momentum
0.25
Negative
46.86
Neutral
37.55
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CARG, the sentiment is Negative. The current price of 30.96 is above the 20-day moving average (MA) of 30.61, below the 50-day MA of 32.63, and below the 200-day MA of 34.09, indicating a neutral trend. The MACD of 0.25 indicates Negative momentum. The RSI at 46.86 is Neutral, neither overbought nor oversold. The STOCH value of 37.55 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CARG.
CarGurus Risk Analysis
CarGurus disclosed 45 risk factors in its most recent earnings report. CarGurus reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
CarGurus Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $584.40M | 9.83 | 54.21% | ― | 57.83% | 293.63% | |
71 Outperform | $1.43B | 13.22 | 19.96% | ― | 5.35% | 33.74% | |
68 Neutral | $2.37B | 3.26 | 3.33% | 0.00% | -5.54% | -14.30% | |
66 Neutral | $2.95B | 23.44 | 39.29% | ― | 4.21% | ― | |
64 Neutral | $1.40B | 15.50 | 5.63% | ― | 17.38% | ― | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% |
* Consumer Cyclical Sector Average
CARG
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30.96
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.