CarGurus (CARG) Fell Despite Reporting Strong Earnings

Meridian Funds, managed by ArrowMark Partners, released its “Meridian Growth Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here.  Uncertainty surrounding prospective tariff policies weighed on investor sentiment and risk assets in the quarter, leading U.S. equities to experience their weakest performance since 2022.  Value stocks outperformed their growth counterparts within the small-cap space. Against this backdrop, the fund returned -8.01% (net) compared to the Russell 2500 Growth Index’s -10.80% return. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Meridian Growth Fund highlighted stocks such as CarGurus, Inc. (NASDAQ:CARG). Headquartered in Cambridge, Massachusetts, CarGurus, Inc. (NASDAQ:CARG) is an online automotive marketplace. The one-month return of CarGurus, Inc. (NASDAQ:CARG) was 10.79%, and its shares gained 26.25% of their value over the last 52 weeks. On June 3, 2025, CarGurus, Inc. (NASDAQ:CARG) stock closed at $31.41 per share, with a market capitalization of $3.105 billion.

Meridian Growth Fund stated the following regarding CarGurus, Inc. (NASDAQ:CARG) in its Q1 2025 investor letter:

“CarGurus, Inc. (NASDAQ:CARG) is a leading online platform for automobile sales, operating both a retail marketplace and an auction based wholesaling business. The company’s competitive pricing and broad suite of ancillary services continue to attract dealers. Despite a strong quarter for its core business, the stock declined after revenue came in at the midpoint of guidance, and forward guidance was slightly below expectations. We remain constructive on the company’s long-term prospects, supported by growing profitability and free cash flow from its core operations. In addition, we believe the ongoing restructuring of its wholesaling business presents upside potential. CarGurus remained one of the portfolio’s top holdings at period end.”

An online automotive marketplace platform with a large selection of car listings.

CarGurus, Inc. (NASDAQ:CARG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held CarGurus, Inc. (NASDAQ:CARG) at the end of the first quarter, which was 38 in the previous quarter. CarGurus, Inc.’s (NASDAQ:CARG) first quarter revenue was $225 million, up 4% year-over-year, but below the midpoint of guidance range. While we acknowledge the potential of CarGurus, Inc. (NASDAQ:CARG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered CarGurus, Inc. (NASDAQ:CARG) and shared Meridian Growth Fund’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.