On Monday, RBC Capital Markets adjusted its stance on CAR Group (CAR:AU) (OTC: CSXXY), downgrading the stock from Outperform to Sector Perform and slightly reducing the price target to AUD39.00 from AUD39.50. Wei-Weng Chen, an analyst at RBC Capital, noted that CAR Group's first half of 2025 results showed a 9% increase in both revenue and EBITDA. However, this performance fell short of market expectations by 2.9%. According to InvestingPro data, the company currently trades at a P/E ratio of 58.1x and maintains impressive gross profit margins of 84.15%, though analysis suggests the stock may be overvalued at current levels.
The company's Latin American (LATAM) division was highlighted as a positive, being the only segment to exceed forecasts with a 2.3% increase in both revenue and EBITDA. Despite this, a revision in the full-year 2025 revenue guidance for the United States prompted RBC Capital to reassess the near-term outlook for CAR Group. The company has demonstrated strong overall growth, with revenue increasing 40.64% over the last twelve months to $732.87 million, maintaining a robust financial health score of 3.23 (GREAT) on InvestingPro.
Chen stated that while the firm's long-term perspective on CAR Group's business remains positive, the downgrade was influenced by the limited potential for stock price growth relative to the target and what RBC Capital perceives as a full valuation of the company. The analyst emphasized, "Although our long term thesis on the business remains intact, given limited implied upside to our Price Target (NYSE:TGT) and a full valuation we downgrade our recommendation to Sector Perform (Prev. Outperform)."
The reiteration of full-year guidance by CAR Group suggests that the company maintains confidence in its overall performance for the year. However, the tempered forecast for the U.S. market seems to have played a significant role in the analyst's decision to adjust the stock's rating and price target.
Investors will likely monitor CAR Group's upcoming performance closely, particularly in the U.S. market, to assess the impact of the revised revenue guidance on the company's financial health and stock valuation. Meanwhile, RBC Capital's new rating and price target reflect a more cautious outlook for the stock's near-term growth potential. For a deeper understanding of CAR Group's valuation metrics and access to 13 additional ProTips, including dividend history and debt levels, consider exploring InvestingPro's comprehensive analysis tools.
In other recent news, Jefferies, a financial services company, has revised its price target for CAR Group, raising it slightly from AUD43.60 to AUD43.70. This adjustment comes in the wake of CAR Group's recent performance, which trailed consensus expectations by 3%. This shortfall was largely attributed to a temporary slowdown in the company's United States business, TI. However, Jefferies' analysts anticipate a significant improvement in TI's outlook starting from the financial year 2026, predicting potential double-digit growth when market conditions ameliorate.
The analysts' optimism is grounded in CAR Group's potential for further diversification. Despite the current challenges in the U.S., CAR Group has shown strong growth in other markets, including Brazil and Korea. The Australian market is also contributing to the overall performance of the group with high single-digit growth.
These recent developments are significant for investors as they indicate the company's ability to navigate temporary challenges and maintain growth in various international markets. Jefferies maintains a positive stance on CAR Group, emphasizing the potential for sustained growth across its diversified operations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.