DA Davidson has reduced its price target for CarGurus Inc. to $33.50 from $37.50 and left its rating on the shares at Neutral. The research house made the adjustment after trimming its forecast for 2026 adjusted EBITDA, a change the firm attributed to the company’s fourth-quarter 2025 results and the accompanying forward outlook.
CarGurus reported fourth-quarter total revenue that rose 15% year-over-year, a performance that landed roughly 1% ahead of consensus estimates. The company’s revenue advance reflected a combination of higher per-dealer revenue and dealer additions in its core U.S. market.
Specifically, U.S. quarterly average revenue per subscribing dealer increased by 8% year-over-year, and the company recorded a net gain of 306 U.S. paying dealers quarter-over-quarter. DA Davidson characterized the quarter as solid overall and highlighted a notably high gross profit margin when assessing the business.
On profitability, CarGurus delivered a gross profit margin of 92.78% over the last twelve months, a figure the research firm cited in support of the quarter’s quality. Valuation metrics referenced in the note included a price-to-earnings ratio of 15.4, and InvestingPro’s analysis places the stock on a Most Undervalued list relative to its Fair Value.
Despite the generally positive operating metrics, DA Davidson pointed to investor confusion in recent weeks stemming from mixed messaging by management on the 2026 margin outlook. That uncertainty around margins for the coming year played a central role in the decision to lower the firm’s forward estimates. The research note also observed that four analysts have revised their earnings forecasts downward for the upcoming period, as flagged by InvestingPro Tips.
Although the firm trimmed its target price by $4, it left the stock’s rating unchanged at Neutral. The move reflects a balancing of CarGurus’ solid near-term revenue and margin profile against uncertainty in the company’s forward margin guidance and consensus earnings revisions.
The update underscores how midcycle guidance and clarity around margin trajectories can influence analyst estimates and target prices even when recent operating results are favorable.