Inventory Stabilizes, But Cars.com Lags Peers: Analyst Flags Profit Pressures
JP Morgan analyst Rajat Gupta cut the price forecast on Cars.com Inc. (NYSE:CARS) from $21.00 to $17.00 while reiterating a Neutral rating.
On Thursday, the company reported fourth-quarter adjusted EPS of $0.49, falling short of the $0.56 estimate, while revenue came in at $180.43 million, missing the street view of $183.90 million.
The company sees first-quarter revenue of $178 million and $181 million vs. consensus of $184.955 million and full-year revenue of $745 million to $755 million vs street view of $756.399 million.
The analyst writes that a significant fourth-quarter miss versus prior guidance was largely due to reduced dealer spending as inventory levels stabilized.
Meanwhile, management’s stance on profit compression as a key factor seems unclear, given that franchised dealer new GPUs (according to JDP) declined by only ~$100 sequentially, which is a much slower drop than in previous quarters, adds the analyst.
The analyst says that industry dealer inventory levels at the end of December 2024 were down ~5% compared to September 2024 levels.
Accu-Trade adoption increased to ~1,000 dealers from 950 in the third quarter, while OEM and National revenue grew 15% year-over-year, adds the analyst.
Overall, Gupta says that the results reflect weak performance, with growth remaining sluggish and significantly below its peers.
Investors are focused on a potential second-half inflection to regain confidence in management’s execution, adds the analyst.
Consequently, the analyst revised the EBITDA estimates, lowering first-quarter 2025 to $47 million (from $53 million) and 2025/2026 EBITDA to $215 million/$235 million (from $225 million/$245 million).
Price Action: CARS shares are up 6.32% at $12.79 at the last check Friday.
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Latest Ratings for CARS
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Feb 2022 | Northcoast Research | Initiates Coverage On | Neutral | |
| Nov 2021 | DA Davidson | Maintains | Buy | |
| Aug 2021 | Truist Securities | Initiates Coverage On | Buy |
View More Analyst Ratings for CARS
View the Latest Analyst Ratings
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