CARG - CarGurus.com and Cars.com rally after JPMorgan issues bull ratings

2023-06-27 08:11:53 ET

JPMorgan initiated coverage on both CarGurus ( NASDAQ: CARG ) and Cars.com ( CARS ) with an Overweight rating on Tuesday.

The firm believes the auto marketplace sector is a relatively safe place for investors to hide in the current macro backdrop given the undemanding valuation and with some cyclical support as new car inventory grows as both dealers and consumers look to get increasingly efficient with buying and selling decisions.

Analyst Rajat Gupta noted that CARG and CARS are both asset-light and on the right side of cycle. In addition, the SaaS-like revenue streams and flexible status of operating expenses were highlighted. Other positive factors for the auto retail stocks include generative AI applications, relatively stable earnings, and favorable free cash flow growth expectations for the near to medium term. Some balance sheet leverage within bounds is also anticipated.

JPMorgan modeled +20% EBITDA CAGR for CarGurus.com ( CARG ) between 2023 and 2025 and +8% EBITDA CAGR For Cars.com ( CARS ) for the same time period. The firm assigned a price target of $29 to CARG and $23 to CARS.

Shares of CarGurus.com ( CARG ) rallied 5.20% in premarket action on Tuesday and Cars.com ( CARS ) rode 2.49% higher.

More on CarGurus.com and Cars.com

• CarGurus rallies after posting better-than-feared Q1 earnings report
• Cars.com earnings call transcript
• Valuation metrics on CarGurus.com
• Valuation metrics on Car.com
• Seeking Alpha's Quant Rating for CarGurus.com
• Seeking Alpha's Quant Rating for Cars.com

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