CarGurus (CARG) should keep growing as dealer tools, AI features, higher intent traffic, and cautious margin assumptions support a positive outlook, RBC Capital Markets said in a note Friday.

Q1 was not especially strong, but the company's results held up well in a difficult market, while mid-teens growth remained encouraging, RBC said.

Dealer count was a little weaker than expected, but revenue per dealer was better, helped by added products, pricing tools, data features, and AI-related service, while international traffic declines looked weak at first, but the change was related to privacy adjustments rather than a deeper business problem, according to the note.

The investment firm said CarGurus' new ChatGPT app is performing well so far, while traffic from AI search appears more likely to convert, though the traffic base is still small.

RBC kept its outperform rating for CarGurus and raised its price target to $35 from $34, as CarGurus has a record of setting conservative targets and then doing better, while product investment, AI use inside the company, and the remaining $75 million buyback authorization give CarGurus more room to support future growth.

Price: 33.56, Change: -1.19, Percent Change: -3.41