Online marketplace for new and used cars Cars.com (NYSE:CARS) missed analysts’ expectations for the second quarter of calendar year 2024. Revenue rose 6.4% year over year to $178.9 million. Revenue forecast for the next quarter of $179.5 million was also underwhelming, coming in 3.4% below analyst estimates. GAAP earnings were $0.17 per share, which was below earnings of $1.37 per share in the same quarter last year.
Is now the right time to buy Cars.com? Find out in our full research report.
Highlights of Cars.com (CARS) in the second quarter of calendar year 2024:
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Revenue: $178.9 million versus analyst estimates of $181.8 million (1.6% shortfall)
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EPS: $0.17 versus analyst estimates of $0.11 (exceeded $0.06)
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Sales forecast for the 3rd quarter of the calendar year 2024 is on average 179.5 million US dollars, below analyst estimates of 185.9 million US dollars
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EBITDA margin: 28.2%, compared to 27.1% in the same quarter last year
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Free Cash Flow of $28.99 million, similar to the previous quarter
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Dealer customers: 19,390, 605 more than last year
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Market capitalization: 1.18 billion US dollars
“We delivered disciplined growth and strong profitability in the second quarter while continuing to steadily expand our dealer customer base,” said Alex Vetter, CEO of Cars Commerce.
Originally founded as a joint venture between several media companies, including The Washington Post and The New York Times, Cars.com (NYSE:CARS) is a digital marketplace that brings buyers and sellers of new and used cars together.
Online marketplace
Marketplaces have been around for centuries. They used to be the main streets of small towns or suburban shopping malls. The proximity of sellers to one another was an advantage, as they could attract customers through convenience and choice. Today, countless online marketplaces serve the same function, bundling large customer bases that attract commission-paying sellers. This creates economies of scale, which in turn leads to more customer acquisitions.
Sales growth
Cars.com’s revenue growth has been unimpressive over the past three years, averaging 5.6% per year. This quarter, Cars.com reported mediocre year-over-year revenue growth of 6.4%, falling short of Wall Street’s expectations.
The forecast for the next quarter suggests that Cars.com expects revenue to rise 3% to $179.5 million, slowing from the 5.9% increase in the year-ago quarter. Before the results were released, analysts had forecast a 6.1% increase in revenue for the next 12 months.
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Usage growth
As an online marketplace, Cars.com generates revenue growth by increasing both the number of shoppers on its platform and the average dollar order size.
Cars.com has struggled to grow its active buyer base, a key performance metric for the company. Over the past two years, its buyer base has declined 0.1% annually to 19,390, one of the lowest growth rates in the consumer internet sector.
Fortunately, Cars.com added 605 active buyers in the second quarter, resulting in 3.2% year-over-year growth.
Key takeaways from Cars.com’s Q2 results
We struggled to find many strong positives in these results. Revenue guidance for the next quarter fell short of analyst expectations and revenue missed Wall Street estimates. Overall, this was a weaker quarter for Cars.com. The stock traded down 10.6% to $16 immediately after the results were released.
Cars.com may have had a rough quarter, but does that actually present an opportunity to invest now? When making this decision, it’s important to consider the valuation, business qualities, as well as what happened last quarter. We cover this in our actionable full research report, which you can read for free here.
