CARG · CarGurus
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $29.00
Note written ·
Price against the kill line
20.0% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $29.00, on record since 10 November 2026. The shares are down 2.7% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $29.00, under the October 2026 low zone, which would erase the rebound from that low. Fourth-quarter revenue below the $258.5 million low end of company guidance would also show the case failing.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 258
- Revenue, change on a year (%)
- +11.5
- Gross margin (%)
- 91.8
- Operating margin (%)
- 26.3
- Free cash flow, four quarters ($M)
- 325
- Price to earnings (×)
- 17.0
- Free-cash-flow yield (%)
- 10.4
All filed numbers
What CarGurus reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 258 | +11.5 | 91.8 | 26.3 |
| first filed | 251 | +13.1 | 92.1 | 25.1 |
| first filed | 244 | +14.8 | 92.2 | 16.5 |
| first filed | 241 | +14.7 | 92.3 | — |
| first filed restated | 232 | +13.2 | 92.7 | 27.7 |
| first filed restated | 222 | +13.4 | 92.9 | 27.3 |
| Pre-tax income ($M) | 68.6 |
| Net income ($M) four quarters: 184 | 52.8 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −9.6 |
| Operating cash flow ($M) | 328 |
| Capital spending ($M) | 3.1 |
| Free cash flow ($M) | 325 |
| Cash and short-term investments ($M) | 165 |
| Debt ($M) | Not available |
| Net cash, cash less debt ($M) | Not available |
| Deferred revenue ($M) +8.4% on a year | 25.6 |
| Backlog, orders not yet delivered ($M) −31.8% on a year | 52.6 |
| Receivables ($M) | 47.0 |
| Inventory ($M) at 30 September 2025, filed 6 November 2025 | 0.0 |
| Shareholders' equity ($M) | 303 |
| Market value ($M) | 3,137 |
| Enterprise value, market value plus net debt ($M) | Not available |
| Enterprise value to sales (×) | Not available |
| Enterprise value to operating income (×) | Not available |
| Price to earnings (×) | 17.0 |
| Price to book value (×) | 10.3 |
| Free-cash-flow yield (%) | 10.4 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 10.5% of shares outstanding sold short, 5.0 days of average trading to cover, +22.8% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $1.9M |
| 12 monthsfrom | $1,000K | $7.5M |
The thesis
CarGurus' 5 November 2026 third-quarter report landed at the top of guidance and came with a new $250 million buyback, which supports the shares modestly. Slower guided growth for the fourth quarter and an unresolved New York City lawsuit cap the case, and the fourth-quarter report, expected around late February 2027, decides whether dealer growth holds.
The company reported revenue from continuing operations of $258.4 million, up 12% year over year, at the top of its $253.5–258.5 million range (company 8-K, 5 November 2026). Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $89.7 million against guidance of $82.0–90.0 million. Adjusted earnings per share were $0.70 against a $0.66 consensus, according to Earnings Whispers.
The shares closed at $33.74 on 6 November 2026, down from $36.15 on 5 November 2026, and recovered to $34.81 on 11 November 2026. Earnings Whispers reported that analysts pressed management on search traffic and lead attribution as AI search tools take share of car-shopping queries. Barclays and Citigroup each raised their price target to $41 on 9 November 2026 (company news).
Bullish and bearish views on CarGurus, Inc.
The bull case on CarGurus, Inc. (CARG), in brief: results landed at the top of guidance. The bear case: guided growth slows sharply.
Bull case
- Results landed at the top of guidance. Third-quarter revenue of $258.4 million, up 12%, matched the upper end of the range, and adjusted EBITDA of $89.7 million sat at the top of its range (company 8-K, 5 November 2026).
- Margin outlook was raised again. Full-year adjusted EBITDA guidance is $347.5–355.5 million and adjusted earnings per share $2.66–2.72, on revenue of $1,011.5–1,016.5 million (company 8-K, 5 November 2026). Earnings Whispers noted it was the second straight quarter of a higher margin outlook.
- Dealer additions improved. Management said net U.S. dealer additions were 251 sequentially, the best quarter of 2026, and multi-product U.S. dealers grew about 16% (Earnings Whispers, 5 November 2026).
- A $250 million buyback was authorized. The board approved the program on 5 November 2026, running through 2027, and cash was $164.9 million at 30 September 2026 (company 8-K).
- Analysts raised targets after the report. Barclays (Overweight) and Citigroup (Neutral) each raised their target to $41 on 9 November 2026, and RBC kept Outperform with a $41 target on 6 November 2026 (company news). All three sit above the $34.81 close of 11 November 2026.
Bear case
- Guided growth slows sharply. Fourth-quarter revenue guidance of $258.5–263.5 million implies growth of 7.2% to 9.3%, against 12% in the third quarter, per Earnings Whispers. Management cited lighter first-half bookings, dealer margin pressure and softer consumer demand.
- Paying-dealer growth is slowing. CarGurus had 34,701 paying dealers at 30 September 2026, up 3% year over year, against 34,629 and 5% growth at 30 June 2026 (company results releases).
- Traffic softened. U.S. unique visitors and sessions slowed versus the second quarter, and analysts questioned AI search disintermediation on the call (Earnings Whispers, 5 November 2026).
- Repurchases ran below earlier pace. Third-quarter cash paid for repurchases was $22.9 million, against $29.2 million in the second quarter and $175 million in the first (company releases). The new program sets no schedule.
- The city lawsuit is unresolved. New York City's Department of Consumer and Worker Protection sued on 15 October 2026, alleging more than 2,000 violations tied to deal ratings and an AI chatbot that omitted mandatory fees. The company said it will defend itself.
- Executives sold shares under pre-set plans. COO Samuel Zales sold 10,000 shares on 15 October 2026 and another 10,000 on 2 November 2026, and Executive Chair Langley Steinert sold 2,866 shares on 4 November 2026 and 590 on 6 November 2026, all under Rule 10b5-1 plans (SEC Form 4 filings).
Price setup
The shares closed at $34.81 on 11 November 2026. That is 15.6% below the 52-week intraday high of $41.22 on 7 August 2026, and the three-month change is −8.2%. The 52-week closing low is $26.96 on 12 February 2026.
The 11-11 close is above both the 50-day average of $32.11 and the 200-day average of $32.89, as of that date, adjusted daily closes. The shares fell from $36.52 on 4 November 2026 to $33.74 on 6 November 2026, the session after the report, and have closed higher on each of the three sessions since.
The market has priced a slower fourth quarter: the shares sit more than 15% under the high even though the quarter beat the top of its guided revenue range and the margin outlook rose. The downside level the case turns on is the October 2026 low zone, which the kill line sits beneath.
Catalysts ahead
- ~25 February 2027 (est.): Fourth-quarter and full-year 2026 results. Tests the $258.5–263.5 million revenue guidance, paying-dealer growth after the 3% reading at 30 September, and the pace of buybacks under the $250 million program.
What would change the view
A daily close below $29.00, under the October 2026 low zone, which would erase the rebound from that low. Fourth-quarter revenue below the $258.5 million low end of company guidance would also show the case failing.
The risks this note tracks, each with what would confirm it:
- The New York complaint spreads to other regulators or forces changes to deal ratings and fee display that reduce dealer value. Confirmed by: a second government action citing similar practices, or disclosed product changes or penalties in a company filing or the fourth-quarter report.
- Paying-dealer growth keeps slowing and revenue growth falls short of guidance. Confirmed by: paying dealers growing under 3% year over year, or fourth-quarter revenue below $258.5 million.
- AI search tools divert car-shopping traffic and weaken lead volume to dealers. Confirmed by: a further decline in U.S. unique visitors and sessions at the fourth-quarter report, or management citing lead attribution as a cause of dealer churn.
- Repurchases stay modest despite the new authorization. Confirmed by: fourth-quarter repurchases at or below the $22.9 million paid in the third quarter.
What it trades with
CarGurus trades on online automotive marketplace demand and dealer budgets, so it follows used-car pricing and dealer sentiment more than the broad market. Cars.com and Carvana react to the same dealer-inventory and consumer-credit signals. Regulatory action on fee disclosure in car advertising and the shift of shopping queries to AI search are shared risks across online automotive listing sites.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was $258.4 million, up 12% year over year; paying dealers were 34,701, up 3%. CarGurus Q3 2026 results, Form 8-K · as of
- Third-quarter adjusted EBITDA from continuing operations was $89.7 million; non-GAAP free cash flow $73.9 million; GAAP net income from continuing operations $52.8 million, up 2%. CarGurus Q3 2026 results release · as of
- Fourth-quarter guidance: revenue $258.5–263.5 million, adjusted EBITDA $93.0–101.0 million, adjusted EPS $0.73–0.79; full-year revenue $1,011.5–1,016.5 million. CarGurus Q3 2026 results, Form 8-K · as of
- Fourth-quarter revenue guidance implies growth of 7.2% to 9.3%; net U.S. dealer additions were 251 sequentially; U.S. traffic slowed versus the second quarter. Earnings Whispers, Q3 2026 earnings summary · as of
- Board authorized a $250.0 million repurchase program; third-quarter cash paid for repurchases was $22.9 million; cash was $164.9 million at 30 September. CarGurus Q3 2026 results, Form 8-K · as of
- New York City's consumer protection department sued CarGurus alleging more than 2,000 violations over deal ratings and an AI chatbot's omission of mandatory fees. NYC Department of Consumer and Worker Protection press release · as of
- Barclays (Overweight) and Citigroup (Neutral) each raised their price target to $41. Company news, analyst rating actions · as of
- COO Samuel Zales sold 10,000 shares on 2 November 2026 under a Rule 10b5-1 plan; Executive Chair Langley Steinert sold 590 shares on 6 November 2026 under a plan. SEC Form 4 filings · as of
Sources