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Why Cars.com Declined 16% Wednesday Afternoon

By Daniel Miller - Feb 26, 2020 at 5:21PM

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Cars.com has yet to convince investors it can accelerate its business in the near term.

What happened

Shares of Cars.com (CARS 5.73%), a leading automotive digital marketplace used to connect sellers and shoppers, are down 16% Wednesday afternoon after fourth-quarter results failed to inspire investors.

So what

Fourth-quarter revenue declined 7.4% compared to the prior year to $152 million, which narrowly missed analysts' estimates calling for $153 million. Adjusted earnings per share checked in at $0.63, easily beating analysts' estimates calling for $0.37 per share. Average monthly unique visitors jumped 32% to 23.5 million, and total traffic (visits) was up 39% to 146.2 million during the fourth quarter. "We exited 2019 with momentum and fundamental strength. We increased dealer count by nearly 200 customers in the fourth quarter, delivered strong cash flow and performance in line with expectations, and accelerated category-leading traffic gains." said Alex Vetter, president and CEO of CARS, in a press release.

Man pointing to an online vehicle image

Image source: Getty Images.

Now what

CARS Chart

CARS data by YCharts

It's been a rough year for Cars.com, but there's reason to believe it could turn a corner by midyear 2020. Management reignited its traffic, stabilized its dealer base despite entering 2020 with a lower number, and updated its go-to-market strategy. Management believes all of those initiatives, among others, will help return the company to strong growth during the second half of 2020. Management may be able to accelerate business in the second half of 2020, but it's worth noting that the car industry in general is plagued with gloomy forecasts as car sales in North America plateau. 

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Cars.com Inc. Stock Quote
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