What Happened?
Shares of online new and used car marketplace Cars.com (NYSE: CARS) jumped 3.5% in the afternoon session after analysts at J.P. Morgan and B. Riley raised their price targets, signaling growing confidence in the online automotive marketplace. On August 11, J.P. Morgan maintained its buy rating on Cars.com and adjusted its price target up from $14 to $15. This followed a similar move from B. Riley, which had boosted its price objective to $22.00 from $21.00 while keeping a 'buy' rating on the stock. This wave of positive analyst sentiment notably overshadowed the company's latest earnings results, which missed consensus estimates for both earnings per share and revenue. According to one report, the stock still increased as the upgrades seemed to fuel investor confidence in the company's market position and future outlook.
After the initial pop the shares cooled down to $12.64, up 1.8% from previous close.
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What Is The Market Telling Us
Cars.com’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 25 days ago when the stock gained 4.5% on the news that JPMorgan upgraded the stock. The investment bank raised its rating on the online automotive marketplace to "Overweight" from "Neutral," while keeping its price target at $14.00. JPMorgan's decision was based on a valuation analysis, noting that Cars.com trades at a significant discount to its primary competitor, CarGurus. The bank felt this valuation gap is overly wide, even considering Cars.com's slower recent growth. An "Overweight" rating suggests that the analyst believes the stock will outperform the average return of the other stocks the analyst covers over the next 6 to 12 months. This positive assessment from a major financial institution signaled a shift in sentiment, boosting investor confidence in the company's prospects.
Cars.com is down 24.9% since the beginning of the year, and at $12.64 per share, it is trading 37.1% below its 52-week high of $20.10 from December 2024. Investors who bought $1,000 worth of Cars.com’s shares 5 years ago would now be looking at an investment worth $1,455.
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