CarGurus Slumps, Company Sees Slowing Q3 Sales, Reduced Demand for Cars

Shares of online automotive platform CarGurus fell as much as 15% in extended trading Monday (Aug 8) after the Cambridge, Mass-based company said its sales for the current quarter would slow from Q2.

This, as the company saw its Q2 sales rise 135% to $511 million for the three months that ended June 30, but warned that a mix of economic headwinds and weakening demand for big ticket purchases would crimp revenue growth for the current quarter.

“With inflation, rising interest rates, concerns of a recession and changing consumer sentiment, dealers are further challenged with reduction in demand for vehicle purchases,” CarGurus CEO Jason Trevisan told investors on the earnings call, adding that Q3 and Q4 historically face a seasonal slowdown.

While CarGurus’ triple-digit revenue growth was driven in part by dealer acquisitions, that pace slowed to 1% and brought the total to 31,143 paying dealers in Q2. The average revenue per dealer rose 4% in Q2 to $5550.

At the same time, CarGurus said its average monthly users fell 10% to 29.5 million and its monthly sessions slid about 1% to 81.1million.

As much as CarGurus’ trailing results were stronger than expected, its forward forecast for Q3 came in lower than analysts projected, a reality that marks the latest auto retailer to announce the impact of weakening demand and rising interest rates.

“While we continue to closely monitor the impact of these macro factors, we feel confident that we’ve built a resilient platform,” Trevisan said, noting the company’s market share gains for both retail consumers and wholesale dealerships.  “We are marching towards fulfilling our vision of creating the only platform where dealers can source, market, and sell — and consumers can shop, finance, buy and sell,” he added.

Even though rivals such as Carvana and Vroom reported lower than expected results and cautious outlooks last week, investors have bid up both stocks more than 50% over the past five days after falling close to 90% over the past year.

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