What To Expect From CarGurus’s (CARG) Q1 Earnings

Kayode Omotosho /
2023/05/08 4:33 am EDT

Online auto marketplace CarGurus (NASDAQ:CARG) will be reporting earnings tomorrow afternoon. Here's what investors should know.

Last quarter CarGurus reported revenues of $286.7 million, down 15.5% year on year, beating analyst revenue expectations by 1.9%. It was a weak quarter for the company, with declining revenue and an underwhelming guidance for the next quarter. The company reported 31.3 thousand paying users, up 2.21% year on year.

Is CarGurus buy or sell heading into the earnings? Read our full analysis here, it's free.

This quarter analysts are expecting CarGurus's revenue to decline 50.2% year on year to $214.4 million, a significant deceleration compared to the 151% year-over-year increase in revenue the company had recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.16 per share.

CarGurus Total Revenue

Majority of analysts covering the company have reconfirmed their estimates over the last thirty days, suggesting they are expecting the business to stay the course heading into the earnings. The company only missed Wall St's revenue estimates once over the last two years, and has on average exceeded top line expectations by 6.33%.

Looking at CarGurus's peers in the online marketplace segment, some of them have already reported Q1 earnings results, giving us a hint of what we can expect. Cars.com delivered top-line growth of 5.6% year on year, beating analyst estimates by 0.1% and MercadoLibre reported revenues up 35.1% year on year, exceeding estimates by 5.22%. Cars.com traded down 1.75% on the results, MercadoLibre was up 3.77%. Read our full analysis of Cars.com's results here and MercadoLibre's results here.

There is still much uncertainty in the markets. The Federal Reserve's hawkish stance on rates, meant to tame inflation, remains a key market narrative. There is an added wrinkle now with troubles in the banking sector, triggered by Silicon Valley Bank's fairly sudden and surprising collapse. Given these, the question is whether higher rates (which dampen economic activity) and potentially less lending from the overall banking sector will trigger a recession. While some tech stocks have recovered year-to-date, most are still well off their 52-week highs. CarGurus is down 7.21% over the last month, and is heading into the earnings with analyst price target of $19.5, compared to share price of $16.16.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.