CarGurus, Inc. (CARG): A Bull Case Theory

We came across a bullish thesis on CarGurus, Inc. on Valueinvestorsclub.com by u0422811. In this article, we will summarize the bulls’ thesis on CARG. CarGurus, Inc.'s share was trading at $32.40 as of January 30th. CARG’s trailing and forward P/E were 21.90 and 13.37 respectively according to Yahoo Finance.

CarGurus, Inc. operates an online automotive platform for buying and selling vehicles in the United States and internationally. CARG is emerging as a compelling investment after navigating a series of operational missteps, most notably its failed CarOffer venture. The company is a leading online used car classifieds platform in the U.S., benefiting from strong competitive positioning with ~60% more monthly active users than its nearest competitor and a proven ability to drive dealer leads efficiently.

Dealers consistently report that CarGurus delivers superior lead volume at lower cost-per-sale compared with competitors, making the platform critical to their sales operations. CARG has also demonstrated pricing power, increasing its quarterly annual subscription per dealer (QARSD) at a 15% CAGR since 2016 and ~10% CAGR post-COVID, while expanding its dealer count despite economic headwinds. The CarOffer fiasco, which de-rated CARG’s multiple from >20x EBITDA to <10x EBITDA, is now fully wound down, leaving a cleaner, more focused business.

The broader used car market, inherently cyclical, is positioned for a rebound. Supply disruptions during COVID and higher interest rates temporarily constrained inventory and financing, suppressing online advertising spend and compressing CARG’s revenue growth. With interest rates normalizing and the average age of U.S. used cars at record highs, the market is primed for increased supply, which should support dealer engagement and revenue growth.

Financially, CARG offers an attractive valuation at ~15x P/E and ~10x EBITDA with a 7% free cash flow yield. The combination of mid-teens organic earnings growth, aggressive share repurchases (~23% of float since December 2022), and a potential cyclical recovery could drive high-teens to low-20% EPS CAGR. Secular tailwinds, declining share count, and market recognition of its dominant positioning suggest substantial upside potential.

Risks include recessionary impacts on used car sales, potential misallocation of free cash flow, and long-term technological disruption, though these appear manageable in the near term. Catalysts include continued execution, FCF generation with buybacks, institutional attention, and potential market recovery. CARG thus represents a high-quality business at an inflection point with both cyclical and secular growth drivers.

Previously, we covered a bullish thesis on Carvana Co. (CVNA) by Investing City in May 2025, which highlighted its vertically integrated e-commerce model, financing capabilities, and pivot toward profitability through operational efficiencies. CVNA’s stock price has appreciated by approximately 25.22% since our coverage . u0422811 shares a similar but emphasizes CarGurus, Inc.’s (CARG) dominant classifieds platform, pricing power, and share repurchases as growth drivers.

CarGurus, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held CARG at the end of the third quarter which was 40 in the previous quarter. While we acknowledge the potential of CARG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.