Carsales released a trading update broadly in-line with Morgans forecasts. Management also announced the exercise of a call option to acquire the remaining 51% of US-based Trader Interactive for around -$1.2bn, via an equity raise.
The broker likes the strategic rationale for the transaction which includes strong recent growth for Trader Interactive and the large total addressable market in US non-auto. Trader Interactive is the market leader in both RV and powersports.
While the transaction will be mid-single digit EPS accretive, the analyst points out this relies on positive tax impacts and other near-term offsetting items. The price target falls to $22.15 from $23.72. Hold.
Sector: Software & Services.
Target price is $22.15.Current Price is $20.76. Difference: $1.39 – (brackets indicate current price is over target). If CAR meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges – negative figures indicate an expected loss).
