ACV Auctions: Why the Stock Remains a Buy Despite Modest Valuation Compression

The stock of ACV Auctions (ACVA) has faced valuation compression in recent months, with divergent analyst price targets reflecting a spectrum of optimism and caution. Yet, beneath the surface of these mixed signals lies a compelling case for long-term investors. Structural growth drivers in the used car auction industry-coupled with ACV's strategic innovations-position the company to capitalize on a market in flux, even as near-term profitability challenges persist.

Structural Growth Drivers: AI and Market Expansion

ACV Auctions is leveraging artificial intelligence to redefine its role in the automotive ecosystem. The company's AI-powered tools, such as ClearCar and ACV MAX, are enhancing pricing accuracy and streamlining wholesale transactions for dealers according to reports. These solutions address a critical pain point in the industry: the need for real-time, data-driven decision-making in a market where vehicle depreciation and inventory management remain top concerns. By improving pricing transparency, ACV is not only increasing dealer efficiency but also expanding its total addressable market.

A key structural tailwind is the company's expansion of commercial remarketing centers. ACV plans to scale these operations from 60,000 units in 2025 to 225,000 units in the future, a move that directly broadens its revenue base. This infrastructure growth is critical in a sector where physical auction capacity has historically constrained scalability. Meanwhile, ACV's digital-first marketplace is capturing market share at a time when traditional auction platforms struggle with digitization.

Divergent Analyst Views: Optimism vs. Caution

Analyst price targets for ACV Auctions span a wide range, from $6.00 (Barclays) to $24.00 (Northcoast), with an average of $14.42-a 74.58% projected increase from current levels. This divergence reflects differing assessments of the company's ability to balance growth with profitability.

On the optimistic side, Northcoast's upgraded $20 price target underscores confidence in ACV's long-term positioning, particularly its AI-driven differentiation. Jefferies, despite reducing its target from $22 to $15, maintains a Buy rating, citing the company's potential for EBITDA growth and its leadership in digital innovation. Conversely, Barclays' $6.00 target, paired with an Equal-Weight recommendation, highlights concerns over near-term execution risks and conversion rates.

The Q3 2025 earnings report illustrates this tension. While revenue grew 16% year-over-year to $200 million, driven by a 10% increase in marketplace units, the GAAP net loss of $24 million and Adjusted EBITDA guidance of $5–$7 million for Q4 signal ongoing profitability hurdles. Analysts like those at Barclays appear to prioritize these near-term metrics, whereas Northcoast and Jefferies focus on ACV's strategic initiatives and market share gains.

The Case for a Buy Thesis

Despite valuation compression, ACV Auctions remains a compelling buy for investors with a multi-year horizon. The company's structural advantages-AI adoption, digital infrastructure, and expanding remarketing capacity-position it to benefit from secular trends in the used car sector. For instance, the shift toward online auctions and data-driven pricing is accelerating, and ACV's first-mover advantage in AI tools like ClearCar creates a durable moat.

Moreover, ACV's 2025 full-year revenue guidance of $756–$760 million (a 19% year-over-year increase) demonstrates its ability to scale even amid macroeconomic headwinds. While profitability remains a near-term concern, the company's strategic focus on margin-enhancing initiatives-such as scaling ACV MAX and optimizing remarketing operations-suggests a path to improved EBITDA performance.

Conclusion

The divergent analyst price targets for ACV Auctions reflect a broader debate between short-term caution and long-term optimism. However, the structural growth drivers in the used car auction industry-coupled with ACV's innovative positioning-justify a bullish outlook. For investors willing to navigate near-term volatility, the stock offers exposure to a company that is not only adapting to industry shifts but actively shaping them.