Cartrade Sees Biggest One-Day Fall After This Brokerage Firm Flagged Costly Valuations, AI Disruption Risk

Shares of Cartrade crashed nearly 19% on Wednesday, its biggest intraday decline, after domestic brokerage firm JM Financial downgraded the stock to ‘sell’ from ‘hold’ rating, while setting a price target of ₹2,350, a 14% downside from Tuesday’s close.

Cartrade is a multi-channel auto platform that enables customers, vehicle dealerships, OEMs, and other businesses to buy and sell their vehicles. Its brands include CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and OLX India.

Brokerage Flags Rich Valuation

JM Financial noted that CarTrade trades at 43x FY27E EBITDA, a valuation it considers “too rich” for a business still heavily reliant on B2B revenue. While the company does operate B2C platforms, JM Financial cautioned that these do not shield it from the cyclical nature of B2B spending.

The company’s New Auto segment, which saw a demand lift driven by GST cuts, has already shown that higher demand does not necessarily translate into proportionate revenue growth, the note read. Similarly, the OLX recovery, with management guiding for 15% growth in Q2FY26, was expected and does not alter forecasts.

The brokerage estimates that New Auto growth will normalise to low-20s levels in the coming quarters, as OEM ad spends have already stabilised. For OLX, though growth is back to mid-teens, it must exceed 17% in 2HFY26 to meet annual guidance.

A significant long-term risk lies in the rise of Generative AI tools such as ChatGPT and Perplexity, which are already diverting traffic away from Google Search, currently the key driver of portal visits. JM Financial’s consumer survey across 20 Indian cities shows nearly 28% of respondents have shifted a portion of their queries to Gen AI tools, threatening CarTrade’s traffic-led ad revenue model.

Stock Watch

Wednesday’s slump comes after a 3-day rally during which the stock had gained over 7%.

The stock has gained nearly 70% so far this year, with most of the momentum coming in the past three months, during which it has surged over 56%.

Cartrade posted a strong Q1 print with a 92.6% surge in net income and a 22.3% jump in revenue.

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