What Happened?
Shares of online auto marketplace CarGurus (NASDAQ: CARG) jumped 1.4% in the afternoon session after the company reported third-quarter 2025 financial results that beat Wall Street's expectations for both revenue and profit.
The online auto marketplace announced revenue of $238.7 million, up 3.2% year over year, which surpassed analysts' projections. Its adjusted earnings per share of $0.57 also came in ahead of consensus estimates. The company's performance was supported by a 6.3% year-over-year increase in paying dealers, a key metric for the marketplace. Adding to the positive sentiment, CarGurus provided an optimistic outlook for the upcoming quarter, with its guidance for revenue, adjusted earnings per share, and EBITDA all exceeding Wall Street's forecasts.
After the initial pop the shares cooled down to $33.57, up 1.3% from previous close.
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What Is The Market Telling Us
CarGurus’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 19.4% on the news that the company had a rough Q4 2024, with revenue and next-quarter guidance falling short of expectations.
Sales grew just 2% compared to the previous year, dragged down by a 55% decline in both Wholesale and Product revenue, while Marketplace revenue, the core business, expanded 15%. International sales were a bright spot, climbing 26%. Despite sluggish revenue growth, gross profit climbed 18% as margins improved. Adjusted EBITDA also surged, outpacing revenue growth and lifting EPS above Wall Street's estimates. First-quarter EBITDA guidance also topped forecasts, pointing to stronger profitability ahead. Still, first-quarter revenue projections signal ongoing softness, with Wholesale and Product segments likely remaining a drag. Investors will watch whether Marketplace momentum can offset these headwinds. Overall, this was a softer quarter due to weaker top-line momentum.
CarGurus is down 6% since the beginning of the year, and at $33.57 per share, it is trading 17.2% below its 52-week high of $40.55 from January 2025. Investors who bought $1,000 worth of CarGurus’s shares 5 years ago would now be looking at an investment worth $1,466.
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