Why ACV Auctions Stock Could Gain 56% Over the Next Two Years

Key Takeaways:

• The 2-Minute Valuation Model values ACV Auctions stock at $25 per share in 2 years.
• That’s a potential 56% upside from today’s price of $16 per share.
• ACVA stock is projected to grow EPS by over 1,400% over the next 3 years as profitability scales dramatically.
• The tech stock is trading at compressed multiples despite being the leading digital auto auction platform with a growing market share.
• Get accurate financial data on over 100,000 global stocks for free on TIKR >>>

ACV Auctions (ACVA) is the leading digital marketplace for wholesale vehicle auctions, transforming how dealers buy and sell used vehicles.

With its technology-driven platform featuring AI-powered inspections, guaranteed pricing, and comprehensive data services, ACV has established itself as the disruptor in the traditional auto auction industry while building an extensive ecosystem of automotive solutions.

With ACVA stock now trading at $16.29 per share, ACV Auctions presents a compelling growth opportunity for investors seeking exposure to the digitization of the automotive wholesale market at an attractive valuation following a recent dip in the stock’s share price.

Let’s examine why this automotive technology leader could deliver substantial returns as the company scales toward profitability and expands its addressable market.

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What is the 2-Minute Valuation Model?

Three core factors drive a stock’s long-term value:

• Revenue Growth: How big the business becomes.
• Margins: How much the business earns in profit.
• Multiple: How much investors are willing to pay for a business’s earnings.

Our 2-Minute Valuation Model uses a simple formula to value stocks:

Expected Normalized EPS * Forward P/E ratio = Expected Share Price

Revenue growth and margins drive a company’s long-term normalized earnings-per-share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.

Why ACV Auctions Stock Looks Undervalued

Forecast

Based on analyst estimates, ACV Auctions is expected to achieve explosive earnings growth over the next three years as it transitions to meaningful profitability.

EPS is projected to surge from $0.07 in 2024 to $1.06 by 2027, representing a 1,400% increase in total.

The growth trajectory shows a dramatic acceleration. In 2025, the company is expected to deliver 243% EPS growth to $0.24, followed by 133% growth in 2026 to $0.56 and 89% growth in 2027.

This earnings growth for ACV stock is likely to be driven by:

• Continued market share gains: ACV maintains consistent mid-teen market share growth in dealer wholesale despite challenging market conditions.
• Operating leverage: As a marketplace business, ACV benefits from significant scale economies as transaction volumes grow.
• Value-added services expansion: Growth in Transportation, Capital, and data services provides higher-margin revenue streams.
• AI-powered differentiation: Proprietary pricing algorithms, guaranteed sales, and inspection technology create competitive moats.

For our valuation, we’ll estimate that ACV will reach $1 in EPS in 2027.

Check out ACV Auctions’ full analyst estimates (It’s free) >>>

Is ACV Stock Undervalued Right Now?

As shown in the valuation chart, ACV Auctions stock trades at around 49x forward earnings, which is below its 12-month historical average P/E of 86x.

This compressed valuation creates an attractive entry point for a high-growth marketplace business with strong competitive positioning.

For our valuation, we’ll use a forward P/E multiple of 25x, which reflects a normalized multiple for a profitable marketplace business and accounts for the company’s transition from early-stage losses to sustainable earnings.

Fair Value of ACVA Stock

Using our 2-Minute Valuation Model and applying a conservative approach:

• Conservative 2027 EPS estimate: $1
• Conservative forward P/E multiple: 25x

Expected Normalized EPS ($1) * Forward P/E ratio (25x) = Expected Share Price ($25)

The 2-year expected ACVA stock price we would get from this valuation is $25 per share.

ACV Auctions stock is currently trading at around $16 per share, which implies a potential upside of 56% over the next two years or a 25% annualized return.

ACVA stock is well-positioned to deliver outsized gains to shareholders, given that the broader markets’ average annual returns have been around 10%.

Remember, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.

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What is Analysts’ Target Price for ACVA Stock?

Analysts think that ACV Auctions stock could have strong upside today.

Analysts have an average price target of around $23 per share for ACVA stock, which is 40% above the current trading price. This target reflects confidence in the company’s market share gains and path to profitability.

Risks to Consider

Despite the bullish outlook, investors should be aware of several risks that could impact ACVA’s growth trajectory:

• Market cyclicality: Auto wholesale volumes are highly sensitive to economic downturns and fluctuations in the used car market.
• Execution risk: Scaling new products and commercial operations requires flawless execution.
• Competition intensity: Traditional auction companies and new entrants are investing heavily in digital capabilities.
• Tariff impacts: Trade restrictions could affect automotive market dynamics and dealer behavior.

TIKR Takeaway

ACV Auctions presents a compelling growth opportunity at current levels. The stock’s significant upside potential is driven by its leadership position in digital auto auctions, explosive earnings growth trajectory, and expansion into adjacent high-value markets, all while trading at historically compressed multiples.

While ACVA faces the typical execution risks of a scaling marketplace business, its technology differentiation, consistent market share gains, and expanding product portfolio position it uniquely for the digitization of the automotive wholesale market.

Is ACV stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if it is undervalued today.

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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!