On Thursday, CarGurus Inc. (NASDAQ:CARG) shares surged more than 4% after RBC Capital Markets analysts upgraded the stock from sector-perform (neutral) to outperform (buy). Analyst Brad Erickson cited CarGurus’ exciting mix of catalysts for the upgrade.
In a note to investors, Erickson wrote:
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With CarOffer, we believe CARG has pulled a critical U-turn toward the secular trend of online car retailing. The combination of CARG’s enormous audience and CarOffer’s dealer-to-dealer marketplace enables critical line of sight down the funnel to transacting in auto retail vs. just providing commoditized lead generation. Our checks with dealers detected solid early signals of CarOffer’s rising success, and we think the combination creates a positive chain reaction of events for CARG that should benefit shareholders over time.
On the other hand, Needham analysts reiterated their buy rating on the stock with a price target of $38.00, implying an upside potential of about 28% based on Thursday’s price of $29.50.
So, should you buy CarGurus shares in Q3 2021?
Despite CarGurus’ recent stock price rebound, shares are still down 8.27% this year, meaning the company is underperforming the S&P 500 index. As a result, the CARG stock trades at an attractive forward P/E ratio of 21.29, making it attractive to value investors.
Moreover, analysts expect CarGurus’ earnings per share to grow by 83.30% this year before rising at an average annual rate of 19.40% over the next five years. Therefore, growth investors could also look to invest in the CARG stock following its recent upgrade.
As a result, this year’s pullback could be a perfect opportunity to buy the stock ahead of its exciting growth story.
Technical overview: CarGurus stock price forecast for September 2021
Technically, CarGurus shares seem to have recently bounced off the 100-day moving average in the intraday chart. Moreover, the stock continues to trade within a gently ascending channel formation, indicating a slight bullish bias.
Therefore, investors can target extended gains at approximately $30.86 or higher at $32.53. On the other hand, if the stock price pulls back, it could find support at $27.94 and $26.22.
Bottom line: the case for buying CarGurus shares now
In summary, although CarGurus shares surged more than 4% on Thursday, the stock is yet to reach overbought conditions in the 14-day RSI. Therefore, CARG has more room to run ahead of its exciting growth.
Moreover, the stock seems reasonably valued based on its forward price-earnings ratio. Therefore, it may not be too late to invest in CARG shares.
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