Key Takeaways:
- CarGurus is expanding beyond its $3.5 billion marketplace TAM into an additional $4 billion dealer software and data products market through AI-powered intelligence solutions.
- CARG stock could reasonably reach $49 per share by December 2027, based on our valuation assumptions.
- This implies a total return of 26% from today’s price of $39, with an annualized return of 12% over the next 2.0 years.
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CarGurus (CARG) is strengthening its position as the #1 automotive marketplace by launching PriceVantage and expanding AI-driven solutions across dealer workflows while scaling CG Discover and Dealership Mode to deepen consumer engagement throughout the car buying journey.
The automotive marketplace leader connects the largest audience of car shoppers with the broadest dealer network through a trust and transparency-focused platform, serving dealers across inventory, marketing, conversion, and data pillars.
The company delivered third-quarter marketplace revenue of $232 million, up 14% year-over-year toward the high end of guidance. Marketplace adjusted EBITDA grew 18% to $82 million with margins expanding 120 basis points to 36%, demonstrating disciplined execution.
CarGurus demonstrates strong execution under CEO Jason Trevisan’s leadership. The company added 1,989 net dealers globally year-over-year with seventh consecutive quarter of positive net adds, grew U.S.
CarSID 8% while international CarSID surged 15%, and launched major innovations including PriceVantage, New Car Exposure, and Dealership Mode.
Here’s why CarGurus stock could provide strong returns through 2027 as it monetizes data intelligence through scalable software solutions while maintaining marketplace leadership with industry-best ROI for dealers.
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What the Model Says for CARG Stock
We analyzed the upside potential for CarGurus stock using valuation assumptions based on its expanding TAM into dealer software, proprietary data advantages from the largest marketplace, and accelerating AI capabilities across both dealer and consumer products.
Based on estimates of 6% annual revenue growth, 33% operating margins, and a normalized P/E multiple of 15.7x, the model projects CarGurus stock could rise from $39 to $49 per share.
That would be a 26% total return, or a 12% annualized return over the next 2.0 years.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for CarGurus stock:
1. Revenue Growth: 6%
CarGurus delivered strong Q3 performance with marketplace revenue up 14% year-over-year. Growth was driven by continued CarSID expansion led by dealer upgrades to higher tiers, broader adoption of add-on products, like-for-like price increases, and higher lead quantity and quality.
International operations contributed meaningfully with revenue up 27% year-over-year. CarSID grew 15% internationally, marking the ninth consecutive quarter of double-digit year-over-year international CarSID growth.
The company added 807 net new dealers internationally, with Canada seeing major franchise dealer conversions.
CarGurus recently launched PriceVantage, a machine learning-based pricing tool powered by real-time consumer demand from the #1 most visited marketplace. Beta results show engaged dealers saw 5x improvement in turn time versus top 5 competitors, while price drop recommendations drove 68% median increase in daily VDP views.
Dealer data insights adoption continues to expand.
- Next Best Deal Rating now serves nearly 20,000 dealers, up 70% year-over-year.
- Dealers made over 700,000 price changes through the tool in Q3 alone, with vehicles using recommendations seeing 48% increase in VDP views.
- Over two-thirds of recommendations are being opened and read.
New Car Exposure rolled out to 94 DMAs and brand combinations, driving 31% of new car VDP views and 13% of new car leads.
Digital Deal adoption surpassed 12,500 dealers with high-value actions growing 45% year-over-year. Reservations close at 16x the rate of standard leads for out-of-market shoppers.
We used a 6.1% forecast, reflecting CarGurus’ ability to sustain marketplace leadership while expanding into the additional $4 billion dealer software TAM, balanced against near-term revenue headwinds from CarOffer wind down.
2. Operating margins: 33%
CarGurus achieved marketplace adjusted EBITDA margins of 36% in Q3, up 120 basis points year-over-year but down slightly quarter-over-quarter due to investments in product innovation and sequentially higher sales and marketing expense.
AI is transforming internal operations as nearly 80% of managed leads in October were handled and closed by AI, enabling 40% reduction in outsourced teams.
Engineering productivity rose 25% through AI coding tools and SEO content generation expanded high-quality content tenfold, driving 60% increase in top and mid-funnel sessions year-to-date.
Management expects full-year marketplace EBITDA margin around 35% at guidance midpoint. The company continues growing investments in primarily AI-centric innovation across dealer and consumer product suites expected to drive long-term growth.
We forecast 33% operating margins, reflecting CarGurus’ ability to expand margins through AI-driven efficiency gains and software product scaling, balanced against continued investment in innovation across the four dealer pillars.
3. Exit P/E Multiple: 15.7x
CarGurus stock currently trades at a P/E multiple of 15.7x, reflecting its marketplace leadership position and expanding software opportunities but down from historical averages due to near-term growth moderation.
We maintain a 15.7x exit multiple given CarGurus’ durable competitive advantages from scale and data intelligence flywheels, the expanding addressable market from $3.5 billion marketplace to additional $4 billion software TAM, and resilience as subscription business with dealers consolidating to best ROI providers.
Management returned $111 million to shareholders through buybacks in Q3 with $55 million remaining on authorization, demonstrating confidence in cash generation and shareholder value creation.
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What Happens If Things Go Better or Worse?
Different scenarios for CARG stock through 2030 show varied outcomes based on software monetization success and marketplace share gains (these are estimates, not guaranteed returns):
- Low Case: Dealer software adoption disappoints and competitive pressures intensify → 4% annual returns
- Mid Case: PriceVantage scales and AI products drive wallet share expansion → 12% annual returns
- High Case: Rapid software monetization and international acceleration → 19% annual returns
Even in the conservative case, CarGurus stock offers positive returns supported by its marketplace leadership, resilient subscription model, and strong free cash flow generation with disciplined capital allocation.
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How Much Upside Does CARG Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
