Hi Debbie,
Regarding the CEO’s comments at Friday’s AGM, we’re hearing a similar message from almost every software and online marketplace business: AI is an opportunity rather than a threat. There is certainly some truth to this, but the key variable is largely outside their control – potential competition. We simply don’t know whether AI will enable new entrants to challenge established platforms, and that’s a risk investors need to be conscious of.
That said, displacing an incumbent like CAR Group isn’t as simple as building an AI-powered alternative. Its enormous audience, extensive dealer relationships, live inventory and proprietary data represent genuine competitive advantages that would be difficult to replicate. We agree with the CEO on this point, although we wouldn’t dismiss the potential for AI to change how consumers search for vehicles, potentially weakening the direct relationship between marketplaces and their users over time.
Ultimately, we think the market is pricing in a fair degree of disruption risk, and at current levels, the balance of risk and reward is becoming increasingly attractive. We’ve been turning more bullish towards CAR Group (ASX: CAR) through October, with our most recent piece here highlighting our bullish stance below $25.
As for a re-rating, we suspect the market will need evidence that CAR can maintain its competitive position and earnings growth despite the AI threat. That may take time, but we don’t believe AI disruption needs to be completely ruled out for the stock to recover from these depressed levels.
MM remains bullish on CAR below $25.
