Why CarGurus (CARG) Shares Are Sliding Today
What Happened:
Shares of online auto marketplace CarGurus (NASDAQ:CARG) fell 19.2% in the pre-market session after the company reported fourth-quarter results with revenue narrowly topping analysts' revenue expectations, though it is still declining as the product and wholesale segments experienced weak growth. On the other hand, marketplace revenue came in strong, with growth up 10% year on year. The total number of paying dealers fell short of expectations during the quarter. The company highlighted some challenges faced in recent quarters, including: "Weak consumer demand, lack of affordability, and heightened expenses." In addition, revenue guidance for next quarter missed Wall Street's estimates. Overall, it was a weaker quarter for the company.
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What is the market telling us:
CarGurus's shares are somewhat volatile and over the last year have had 8 moves greater than 5%. But moves this big are very rare even for CarGurus and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 10 months ago, when the stock gained 9% on the news that the company reported first quarter results that exceeded analysts' estimates for revenue, adjusted EBITDA, free cash flow, and earnings per share (EPS). Additionally, revenue, adjusted EBITDA and EPS guidance for the next quarter were above Consensus. The company's guidance was highly reassuring in light of a choppy auto market dealing with normalization of demand post-COVID and potential lending headwinds challenges due to the recent and potentially growing banking crisis.
CarGurus is down 2.8% since the beginning of the year, but at $22.80 per share it is still trading close to its 52-week high of $24.49 from December 2023. Investors who bought $1,000 worth of CarGurus's shares 5 years ago would now be looking at an investment worth $535.76.
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