CAR Group (ASX.CAR) shares jumped 10% on 2026 full results, which showed pro forma EBITDA up 12% in constant currency to $700 million, driven by 12% revenue growth and flat margins.

Why it matters: Results and guidance are helping to assuage fears around AI disruption, which had cut share prices nearly in half over the past year, peak to trough. Guidance is for revenue growth to accelerate slightly in fiscal 2027 and EBITDA to grow at an unchanged pace compared with fiscal 2026.

  • We were pleased to see the company showing early success in incorporating AI conversational search into the customer journey to improve conversion and engagement. This supports our belief that the company can use its proprietary data to provide a better experience than generic AIs.
  • New dealership features also stood out, such as identifying the best vehicle to promote, automating vehicle inspections and lead nurturing. We think these and others will help improve dealer stickiness and further reduce the potential for disruption from AI, although we view this as defensive.

The bottom line: We maintain our $33 per share fair value estimate for narrow-moat CAR Group. Shares currently screen as close to fairly valued.

  • We forecast a 9% revenue CAGR over our 10-year explicit forecast, driven by population growth, inflation and monetization of ongoing improvements to the car-buying process.

Big picture: We think most of the vehicle discovery will continue to take place on online vehicle marketplaces, rather than move to competing AIs, as we think experiences on these sites are much more optimized for the car buying journey.

Key stats: The company saw a 26% uplift in session to lead conversion on www.carsales.com.au following the introduction of AI conversational search. We think this is an important sign that the company can incorporate AI into its process, rather than risk being disrupted by it.

CAR Group Showing no Signs of AI Disruption

We expect the medium- and long-term strategic focus for Car Group to revolve around functional and geographic expansion. We also expect the company to focus on incorporating AI-powered conversational search throughout its websites.

We expect Car Group to capture a larger part of the car retailing value chain, especially in its original Australian online marketplace for automotive, www.carsales.com.au. Car Group has been a highly innovative company since its launch over two decades ago, launching countless improvements and features to www.carsales.com.au to increase the return on marketing spend for dealerships and private sellers, while simultaneously increasing its own take rate. However, www.carsales.com.au is currently still mostly a marketing channel, which leaves significant opportunity beyond marketing, especially in the buying and selling of cars through its Instant Offer and Carsales Select products. We believe these products address significant pain points for consumers, especially younger ones, and expect adoption of these products to drive take rate for the medium to long term.

Beyond Australian automotive, we expect Car Group to focus on consolidating its markets. Among Car Group’s overseas markets, we believe its South Korean subsidiary, Encar, has been most successful in entrenching itself as the dominant local online marketplace with its guarantee product, while its Brazilian subsidiary has been successfully leveraging its regional leadership positions into national dominance. We believe online marketplaces for vehicles (as opposed to property and employment) are inherently conducive to consolidation due to the indivisibility of their category. We therefore believe Car Group will be successful in these overseas expansion efforts.

Beyond automotive, we expect Car Group to continue refining its pricing strategy in its United States subsidiary for nonautomotive, Trader Interactive. Trader Interactive boasts impressive market-leading positions in recreational vehicles and powersports, and we believe these are significant enough to enable it to transition toward a more sophisticated pricing strategy, which will improve Car Group’s take rate.

Bulls Say

  • Car Group’s online marketplace for Australian automotive, www.carsales.com.au, has established itself as the undisputed leading online marketplace for automotive, supported by networks effects and cost advantages.
  • Car Group has launched new products in Australia to capture a larger part of the automotive retail value chain, which will increase its take rate over time.
  • Car Group has a history of successful overseas expansions and recent investments in lower-maturity online marketplaces in the United States and Brazil provide opportunity for growth.

Bears Say

  • Car Group’s recent investments in overseas online marketplaces have been done at arguably expensive multiples.
  • Car Group invests in online marketplaces in developing markets, especially Latin America, where significant investment may be required to capture the market.
  • Self-driving cars may affect the share of the population owning private vehicles and therefore shrink the market in which Car Group operates.

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