Carsales.com Looking Undervalued Following Global Technology Stock Sell-off

Narrow-moat-rated Carsales.com looks undervalued following the recent global technology stock sell-off, with the current market price of AUD 12.30 meaningfully below our AUD 14.50 fair value estimate. Despite the share price weakness, the company continues to dominate the online automotive advertising market in Australia and is strengthening its business via domestic diversification and international expansion. The potential threat from companies like Facebook and Gumtree is not materialising in the way it theoretically could which we attribute to the depth of information and number of listings on carsales.com.au and associated network effect. Over the next decade, we expect the company to grow EPS at a CAGR of 11%.