CarGurus, Inc. (CARG) of Cambridge, Mass., and Shift Technologies, Inc. (SFT) of San Francisco are two notable participants in the auto dealership industry. Using proprietary technology, search algorithms, and data analytics, CARG offers an online automotive marketplace that connects buyers and sellers of new and used automobiles and related accessories with dealers in the United States, United Kingdom, Canada, and Germany. SFT offers a full-service vehicle e-commerce platform for buying and selling old cars.
Because a global semiconductor chip scarcity is pushing automakers to cut new vehicle manufacturing, the auto industry has recently seen an increase in demand for used vehicles. Demand for new vehicles is also increasing.
Nevertheless, with the revival of COVID-19 cases, customers’ desire to shun public transportation should continue to drive car demand in the coming months. By 2026, the global Automotive Dealer Management Systems (DMS) market is predicted to expand. As a result, both SFT and CARG should benefit.
CARG has risen 10% in price over the last three months, while SFT has risen 4.2%. In terms of the previous month’s performance, CARG is a clear winner with 8.6% price gains versus SFT’s negative returns. So which of these stocks is the better buy right now? Let us investigate.
CARG launched CarGurus Quick Max Cash Offer in 2021, a new solution powered by its CarOffer inventory management technology that allows consumers to sell their automobiles online to the highest-offering dealers in its network via CarOffer’s Purchasing Matrix platform. CARG anticipates a strong level of demand from the used automobile business.
In 2021, SFT will open two new markets in Texas, Dallas and the Fort Worth region, enabling consumers to purchase its vehicles through SFT’s unique direct-to-consumer, at-home service. SFT is excited to grow its portfolio and provide a better client experience across the state.
Recent Financial Results
CARG’s revenues climbed 129.8% year on year to $217.75 million in its fiscal second quarter, which ended in June. The company’s non-GAAP gross profit was $167.54 million, up 94.8% over the previous year.
Non-GAAP operating income rose 179.6% year on year to $68.94 million. While non-GAAP net income climbed 132.4% year on year to $49.54 million, non-GAAP earnings per share increased 115.8% to $0.41. The company has $184.64 million in cash and cash equivalents as of June.
Expected Financial Performance
Experts predict that CARG’s revenue will climb by 50.4% this year and 17.6% next year. Its EPS is predicted to rise 30.6% year on year this year but fall 1.3% the next year.
For instance, SFT’s revenue is predicted to grow 200% year on year this year and 71.9% next year. Its earnings per share (EPS) are likely to stay negative in the future quarters of this year and next.
The global demand for used cars and the increasing desire for private transportation due to COVID-19 should drive the auto industry’s growth. Both CarGurus and Shift Technologies are well-positioned to benefit from this trend, but CarGurus appears to be the better buy right now with its recent product launch and strong financial results. With a predicted revenue increase of 50.4% this year and 17.6% next year, and a non-GAAP net income increase of 132.4% year on year, CarGurus has demonstrated its ability to adapt to changing market conditions and deliver profitable growth. In contrast, Shift Technologies is still reporting negative earnings per share and has not yet established a strong track record of financial performance. Overall, CarGurus is a promising investment option for those looking to capitalize on the growing demand for new and used vehicles in the coming years.
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