Now could be the time to pounce on the ASX 200 blue chip share in this article.
That's the view of analysts at Bell Potter, which have just initiated coverage on the blue chip with a bullish stance.
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Which ASX 200 blue chip share?
The share in question is CAR Group Limited (ASX: CAR). It is the auto listings giant behind the dominant carsales.com.au website and a number of international equivalents.
Bell Potter believes the company is positioned to deliver double-digit earnings per share (EPS) growth each year through to FY 2028. This is expected to be underpinned by its move into large and underpenetrated markets. It explains:
We forecast EPS CAGR of 12.2% between FY25-28e driven by ongoing penetration into large and underpenetrated markets with a defined pathway of platform enhancements to extract value from its audience/networks, including: (1) Australia: Dealer CRM platform upgrade, traction in C2C payments; (2) Nth. Am.: Marine Private sales platform (Pop Sells) and CRM acquisitions, pay-per-lead model driving market share gains in Marine, local legacy advertising practices with significant digital maturity opportunity; (3) LATAM: Regional expansion within Brazil, media/advertising penetration, strong adjacent opportunities, and (4) Sth. Korea: Growth in vehicle inspections and home delivery services in a low-trust environment.
Additionally, CAR's Dealer subscription model and wide pay-per-lead price thresholds can protect against volume/price volatility, which is reflected in CAR's stable earnings growth (historical + forecast), and provides for a preferred risk-adjusted return profile versus REA & SEK.
Time to buy
In light of the above, the broker feels that its shares are undervalued compared to peers.
According to the note, Bell Potter has initiated coverage on the ASX 200 blue chip share with a $42.20 price target.
Based on its current share price of $37.02, this implies potential upside of 14% for investors over the next 12 months.
In addition, the broker is expecting a 2.3% dividend yield, which boosts the total potential return beyond 16%.
Commenting on their buy recommendation, its analysts said:
We initiate on CAR with a Buy rec. and a $42.20/sh TP. CAR has built a global network of auto and non-auto classifieds platforms with the ability to generate cash flows supporting growth investment and shareholder returns simultaneously. CAR screens favourably on a risk-adjusted return basis when considering the stability of earnings growth against comparable ASX-listed classifieds platforms REA (Buy, TP:$284/sh) and SEK (Buy, TP:$31.45/sh); trading at a -24% discount presents a balanced opportunity to accumulate, in our view.
