Behind The Numbers – CarGurus (CARG) Driving Dealer Adoption
CarGurus is a leading Online Auto marketplace, with an active network of over 40,000 U.S. dealers and accounting for approximately 7% of U.S. used cars sold. Shares are surging this morning following the company’s Q2 earnings report:
-EPS of $0.06 vs $0.04 estimate – Beat
-Revenue of $110.3M vs $103.7M estimate – Beat
-Sees Q3 EPS of $0.04 – $0.05 vs $0.05 estimate
-Sees Q3 Revenue of $112M – $113M vs $106.36M estimate
-Average U.S. Monthly Unique Visitors increased 33% Q/Q
AARSD – JMP Securities, DA Davidson, and RBC Capital were all out with positive notes this morning. DA Davidson analyst Tom White would raise his price target to $53 and keep his Buy rating. Among the topics discussed, the analyst points to “very strong” U.S. Average Annual Revenue per Subscribing Dealer, or AARSD, growth of 19%, which he believes should remain a significant tailwind for the company for several quarters.
RBC Capital, in their upgrade note, would also comment on AARSD by saying that Annual Revenue per Subscribing Dealer of $13,130 represented 5% growth Q/Q and +19% Y/Y in the U.S. “We estimate that AARSD rises to > $19,190 by 2020 ($16,890 prior), an approximate 19% increase per year. Given the very consistent 18% average Y/Y U.S. AARSD growth of the past 10 quarters and the ability of CarGurus to layer in new products, we believe this estimate is reasonable.”
Product Innovation – CEO Langley Steinert would comment on the success it has been seeing with unique visitors to its site domestically and internationally (60% more unique visitors to their U.S. site than their nearest major automotive marketplace competitor, and 54% Y/Y unique monthly visitor growth from its international audience).
The CEO would go on to discuss this year’s innovation strategy that will continue to help drive dealer adoption.
“Our first dealer advertising product, Dealer Display, continues to perform well as it gives U.S. dealers the opportunity to get more exposure to the tens of millions of visitors on our site each month. We are also seeing encouraging traction with our dealer search engine marketing product, SEM Plus. After years of optimizing our own programmatic SEM strategy across billions of keywords to drive traffic to our marketplace, we are now leveraging our domain expertise on behalf of our dealers for their own websites.”
Finally, an example that the CEO gave was Colorado-based King Buick GMC and King Chevrolet Buick GMC. Jared King, General Manager of the King dealerships, notes that they switched to CarGurus’ SEM Plus because of the performance of CarGurus listings platform. King adds that SEM Plus has provided 100% increase in sales and leads for the King dealerships as compared to their prior SEM provider.