Should you invest in CarGurus shares after an upgrade from RBC?

On Thursday, CarGurus Inc. (NASDAQ:CARG) shares surged more than 4% after RBC Capital Markets analysts upgraded the stock from sector-perform (neutral) to outperform (buy). Analyst Brad Erickson cited CarGurus’ exciting mix of catalysts for the upgrade.

In a note to investors, Erickson wrote:

On the other hand, Needham analysts reiterated their buy rating on the stock with a price target of $38.00, implying an upside potential of about 28% based on Thursday’s price of $29.50.

So, should you buy CarGurus shares in Q3 2021?

Despite CarGurus’ recent stock price rebound, shares are still down 8.27% this year, meaning the company is underperforming the S&P 500 index. As a result, the CARG stock trades at an attractive forward P/E ratio of 21.29, making it attractive to value investors.

Moreover, analysts expect CarGurus’ earnings per share to grow by 83.30% this year before rising at an average annual rate of 19.40% over the next five years. Therefore, growth investors could also look to invest in the CARG stock following its recent upgrade.

As a result, this year’s pullback could be a perfect opportunity to buy the stock ahead of its exciting growth story.

Technical overview: CarGurus stock price forecast for September 2021

Technically, CarGurus shares seem to have recently bounced off the 100-day moving average in the intraday chart. Moreover, the stock continues to trade within a gently ascending channel formation, indicating a slight bullish bias.

Therefore, investors can target extended gains at approximately $30.86 or higher at $32.53. On the other hand, if the stock price pulls back, it could find support at $27.94 and $26.22.

Bottom line: the case for buying CarGurus shares now

In summary, although CarGurus shares surged more than 4% on Thursday, the stock is yet to reach overbought conditions in the 14-day RSI. Therefore, CARG has more room to run ahead of its exciting growth. 

Moreover, the stock seems reasonably valued based on its forward price-earnings ratio. Therefore, it may not be too late to invest in CARG shares.