Lower Than Expected Guidance Pulled Back ACV Auctions (ACVA) in Q1

TimesSquare Capital Management, an equity investment management company, released its “U.S. Small Cap Growth Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the quarter, the fund returned -9.41% (gross) and -9.64% (net), compared to a -11.12% return for the Russell 2000 Growth Index. There was a broad positive sentiment in the market at the beginning of 2025. Expectations for a pro-business and soft regulatory environment lifted global markets in January. However, delays and uncertainties surrounding U.S. policies led to a significant downturn in March. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, TimesSquare Capital U.S. Small Cap Growth Strategy highlighted stocks such as ACV Auctions Inc. (NYSE:ACVA). ACV Auctions Inc. (NYSE:ACVA) provides a digital marketplace that enables buyers and sellers to connect for the online auction of wholesale vehicles. The one-month return of ACV Auctions Inc. (NYSE:ACVA) was -6.10%, and its shares lost 11.20% of their value over the last 52 weeks. On June 23, 2025, ACV Auctions Inc. (NYSE:ACVA) stock closed at $15.86 per share, with a market capitalization of $2.862 billion.

TimesSquare Capital U.S. Small Cap Growth Strategy stated the following regarding ACV Auctions Inc. (NYSE:ACVA) in its Q1 2025 investor letter:

“Many of our Industrial positions provide necessary business-to-business operational services, highly technical components, equipment enabling automation & efficiency improvements, or essential infrastructure services. ACV Auctions Inc. (NYSE:ACVA) offers a digital marketplace for wholesale vehicle transactions and data services. They reported a strong quarter with a beat to revenues. Underlying metrics including units and pricing were healthy. These demonstrate continued share gains. Despite these positives, ACV pulled back by -35% due to initial 2025 guidance that fell short of Street estimates. Management, which has a history of being conservative, is making incremental investments in technology and personnel.”

Is ACV Auctions Inc. (ACVA)the High Growth Low Debt Stock to Invest in Now?

A row of used cars with shoppers inspecting them on a lot.

ACV Auctions Inc. (NYSE:ACVA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held ACV Auctions Inc. (NYSE:ACVA) at the end of the first quarter, which was 35 in the previous quarter. ACV Auctions Inc.’s (NYSE:ACVA) first quarter revenue grew 25% year-over-year to $183 million. While we acknowledge the potential of ACV Auctions Inc. (NYSE:ACVA) 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 ACV Auctions Inc. (NYSE:ACVA) and shared Meridian Hedged Equity Fund’s views on the company. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of ACVA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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