CarGurus Is 'Putting the Pedal To The Metal' Says Bullish Analyst

Shares of CarGurus Inc CARG continued to climb in early trading on Thursday, and has added more than 65% year to date.

The Massachusetts-based company has a “growing and highly profitable” core listings business that is poised to benefit from increases in unit pricing, according to B Riley Securities.

The Analyst: Naved Khan initiated coverage of with a Buy rating and price target of $28.

The Thesis: Although the company’s move to roll out price increases to dealers has increased the churn rate, the net effect is likely to be “accretive to the top line for the core Marketplace,” Khan said in the initiation note.

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“We expect growth in core to show improvement as the company rolls out price increases to additional customers,” he added.

“Ongoing normalization in dealer inventory, OEM production, and consumer demand are positives for CARG,” the analyst wrote. CarGurus’ Digital Deal is also expected to boost monetization and trigger “faster growth in core."

CARG Price Action: Shares of CarGurus had risen by 0.13% to $23.61 at the time of publication Thursday.

Image: CarGurus