What Happened?
Shares of online auto marketplace CarGurus (NASDAQ: CARG) fell 19.4% in the afternoon session after the company had a rough Q4 2024, with revenue and next-quarter guidance falling short of expectations. Sales grew just 2% compared to the previous year, dragged down by a 55% decline in both Wholesale and Product revenue, while Marketplace revenue, the core business, expanded 15%. International sales were a bright spot, climbing 26%. Despite sluggish revenue growth, gross profit climbed 18% as margins improved. Adjusted EBITDA also surged, outpacing revenue growth and lifting EPS above Wall Street's estimates. First-quarter EBITDA guidance also topped forecasts, pointing to stronger profitability ahead. Still, first-quarter revenue projections signal ongoing softness, with Wholesale and Product segments likely remaining a drag. Investors will watch whether Marketplace momentum can offset these headwinds. Overall, this was a softer quarter due to weaker top-line momentum.
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What The Market Is Telling Us
CarGurus’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. Moves this big are rare for CarGurus and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock gained 19.6% on the news that the company reported second quarter earnings results. CarGurus narrowly topped analysts' revenue and adjusted EBITDA expectations. The quarter also benefitted from the strong performance of the marketplace business, which recorded "the largest quarterly revenue increase since 2021", due to more demand for add-on products and the growing shift to premium subscription tiers. Looking ahead, next quarter's revenue guidance came in higher than Wall Street's estimates. Overall, this was a solid quarter for CarGurus.
CarGurus is down 15.7% since the beginning of the year, and at $30.14 per share, it is trading 25.7% below its 52-week high of $40.55 from January 2025. Investors who bought $1,000 worth of CarGurus’s shares 5 years ago would now be looking at an investment worth $1,092.
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