Amid a supply crunch for new cars and raging price inflation in used cars, Cambridge auto-listing site CarGurus made a big bet last year on adding direct sales — and it paid off in a big way.
CarGurus reported fourth-quarter results that far exceeded the forecasts of Wall Street analysts, and the company’s stock leapt 44 percent on Friday to $46.44, the highest level in more than three years.
The jump in CarGurus stock coincided with big moves in the prices of several other area tech companies that also reported earnings this week.
Everbridge, a Burlington-based company that offers technology for first responders, saw its stock price drop by 34 percent on Friday as it forecast revenue in 2022 would grow at half the rate of 2021. And shares of Iron Mountain, the Boston-based storage and data management company, gained 7 percent after it forecast 2022 revenue would grow at twice the rate of 2021.
CarGurus didn’t forecast its 2022 results but said revenue in the fourth quarter of 2021 increased 124 percent, to $339 million, beating the average analyst forecast by almost $60 million. And adjusted earnings per share of 43 cents beat the average forecast by 13 cents.
CarGurus had long operated a marketplace where consumers could look through listings from thousands of car dealerships around the country. Last year, the company acquired control of CarOffer, an online service which bought and sold cars directly in the wholesale market. That allowed CarGurus to debut a service dubbed “Instant Max Cash Offer,” offering to buy a consumer’s used car on the spot (though subject to an inspection).
Revenue from the CarOffer service hit $179 million in the fourth quarter, 10 times higher than in the first quarter when it was acquired, as dealers and rental car agencies scrambled to buy used cars from consumers amid shortages of new cars. As of this month, more than 10,000 dealerships participated in the marketplace, triple the number from the first quarter, CarGurus said.
Used car and truck prices increased 40.5 percent over the last year, according to the US Bureau of Labor Statistics. New car prices jumped 12.2 percent.
Consumers coming to the site to sell their cars often shift to buying mode, boosting CarGurus’ listing service as well, chief executive Jason Trevisan told analysts.
“Many consumers who are selling their car need to buy a car,” said Trevisan, who took over from founder Langley Steinert last year. “Many of them become leads and digital retail candidates and are then using our marketplace to shop for inventory.”
The lack of new cars, due to widespread shortage of semiconductors, has also bolstered CarGurus’ business by helping consumers buy cars at dealers that are far from where they live. The site is pilot-testing a feature to arrange shipping cars to distant buyers.
“Dealers participating in our delivery pilot are shipping vehicles, on average, 1,500 miles away, highlighting both the need for delivery programs and the potential for geographic arbitrage,” Trevisan said. “This has enabled dealers to further tap into markets beyond city and state lines.”