Stock Story -
What Happened: Shares of online auto marketplace CarGurus (NASDAQ:CARG) jumped 19.6% in the morning session after 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.
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What is the market telling us: CarGurus's shares are not very volatile than the market average and over the last year have had only 5 moves greater than 5%. Moves this big are very rare 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 5 months ago, when the stock dropped 19.2% on the news that 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.
CarGurus is up 12.6% since the beginning of the year, and at $26.51 per share it is trading close to its 52-week high of $26.72 from June 2024. Investors who bought $1,000 worth of CarGurus's shares 5 years ago would now be looking at an investment worth $827.59.
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