While the market has been tough on growth stocks in recent months, CarGurus has been on the comeback trail, rising nearly 20% year to date. Shares are building a base but are still a ways from a buy point.
CarGurus certainly qualifies as a growth stock, with year-over-year earnings and sales growth of 34% and 124%, respectively, in the most recent quarter.
The online automotive marketplace has seen a major turnaround since the early days of the pandemic. After a few successful acquisitions and new product launches, the Cambridge, Mass.-based firm began notching multiple quarters of revenue increases. CarGurus struggled with revenue declines of 34%, 2% and 4% in the June-, September- and December-ended quarters of 2020.
Since then, the company has recorded year-over-year revenue growth of 9%, 130%, 51% and 124% over the past four quarters. EPS has risen 74%, 116%, 3% and 34% over the past four respective quarters.
While the used-car research website remains a consumer-focused business, it has strategically adapted to become a tool for dealerships to optimize their business.
CarGurus Transforms Itself
A major driver of growth has been its acquisition of CarOffer, allowing it to serve as an ultimate resource for car dealerships to run their businesses. CarOffer — a wholesale auction network for dealerships to buy and sell to each other — roughly doubled CarGurus' revenue in the most recent quarter.
In addition, the launch of CarGurus' Instant Cash Offer product has made it possible for consumers looking to sell their cars quickly to receive offers from dealerships on the spot.
"2021 was a transformative year for CarGurus as we evolved from a listings business to a transaction-enabled marketplace providing valuable cross-platform synergies to both our dealer partners and our industry-leading consumer audience," said CEO Jason Trevisan in a the Q4 earnings statement. "This was made possible with the acquisition of CarOffer, the launch of CarGurus Instant Max Cash Offer and the progression of our digital retail capabilities."
CarGurus touts an average monthly website visitor total of 39.1 million and more than 30,000 paying car dealers as of Dec. 31.
Growth Stocks: CarGurus Explodes On Earnings
While most tech and growth stocks have struggled in recent months, CarGurus has managed to outperform. Shares skyrocketed nearly 44% on Feb. 25 after the company reported stronger-than-expected earnings the day before.
Since then shares have been forming an undefined consolidation with a 50.13 buy point. The stock still remains about 17% below this entry. However, a downward trendline can be plotted from the high on Feb. 28. If shares break above the line, that could be a place for aggressive investors to buy shares.
