CarGurus Stock Soars Amid Soaring Used Car Prices
Everbridge, a Burlington-based company that offers technology for first responders, saw its stock price drop 34% on Friday as it forecast revenue in 2022 to increase by half from 2021. And shares of ‘Iron Mountain, the Boston-based storage and data management company, gained 7% after forecasting 2022 revenue to grow twice as much as 2021.
CarGurus did not forecast results for 2022, but said revenue for the fourth quarter of 2021 rose 124% to $339 million, beating analysts’ average forecast of nearly $60 million. And adjusted earnings per share of 43 cents beat the average forecast by 13 cents.
CarGurus had long operated a marketplace where consumers could browse listings of thousands of car dealerships across the country. Last year, the company acquired control of CarOffer, an online service that bought and sold cars directly on the wholesale market. This allowed CarGurus to launch a service called “Instant Max Cash Offer”, offering to purchase a consumer’s used car on the spot (albeit subject to inspection).
Revenue from the CarOffer service hit $179 million in the fourth quarter, 10 times more than in the first quarter when it was acquired, as dealerships and car rental agencies rush to buy used cars to consumers due to the shortage of new cars. This month, more than 10,000 dealers participated in the market, triple the number in the first quarter, CarGurus said.
Prices for used cars and trucks have risen 40.5% over the past year, according to the US Bureau of Labor Statistics. New car prices jumped 12.2%.
Consumers who come to the site to sell their cars often go into buying mode, which also bolsters CarGurus’ referral service, chief executive Jason Trevisan told analysts.
“A lot of consumers who sell their car have to buy a car,” said Trevisan, who took over from founder Langley Steinert last year. “Many of them become digital retail prospects and candidates and then use our marketplace to buy inventory.”
The lack of new cars, due to a widespread shortage of semiconductors, has also bolstered CarGurus’ business by helping consumers buy cars from dealerships far from their homes. The site is currently testing a feature to arrange shipment of cars to remote buyers.
“Dealers participating in our delivery pilot are shipping vehicles, on average, 1,500 miles away, underscoring both the need for delivery programs and the potential for geographic arbitrage,” Trevisan said. “This has allowed dealers to further tap into markets beyond city and state borders.”