Automotive research and shopping website CarGurus Inc. (NASDAQ: CARG) reported its second quarter earnings on Monday, beating analyst consensus estimates on the top and bottom lines. However, investors began to sell off the stock when the Cambridge, Massachusetts-based company issued third quarter adjusted EPS and sales guidance below consensus estimates.
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CarGurus, which assists users in comparing local listings for used and new cars, expects third quarter revenues of $460-$490 million. That's down from the previously estimated $554.61 million.
The company also expects an EPS of $0.25-$0.28, down from the $0.33 estimates.
The newly issued guidance can be seen as an indication for where the used car market is headed.
Used-vehicle sales declined from June to July; current used-vehicle supplies are higher than normal in both retail and wholesale sectors. As a result, prices in July declined more than normal depreciation trends for the time of year.
Used car costs began to rise in January 2021, prices peaked in February 2022 at about $25,500.
Prices are still higher than in prior years, due to the ongoing global supply of microchip shortage, but saw a slight decline in the last month; the median price for all previously owned models was almost $24,000 in July.
“I don’t think anyone expected the supply-chain disruptions that we experienced on the new side of the market, which ultimately sent used prices to the moon,” David Paris, senior manager of market insights at J.D. Power said to Cars.com.
President Joe Biden signed the "Chips and Science Act" on Tuesday, allocating more than $52 billion for American semiconductor manufacturers (the lack of semiconductor availability has contributed to the recent rise in used car prices).
New and used car prices may experience some respite in the months to come as a result.
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