ACVA: Expanding Technology Leadership Will Drive Gains By 2026 Amid Uncertainty

Key Takeaways

• Deployment of AI-driven tools, strategic partnerships, and adjacent services is strengthening platform differentiation, recurring revenue streams, and margin expansion opportunities.
  
• Investments in infrastructure and new business lines are expanding market reach, supporting long-term top-line growth and sustained market share gains amid industry digital transformation.
  
• Softening dealer volumes, unproven growth initiatives, intense competition, and shifting industry dynamics pose risks to ACV's revenue, margins, and long-term market potential.

Catalysts

Provides a wholesale auction marketplace to facilitate business-to-business used vehicle sales between a selling and buying dealership.

• The ongoing integration of advanced AI and machine learning into ACV's vehicle inspection, pricing, and guarantee products positions the platform to further differentiate itself by offering real-time, highly accurate, and transparent transaction solutions-this is expected to continue driving above-industry growth in auction volumes, increase take rates, and support margin expansion.
  
• Expanding partnerships with major dealer groups and scaling data-driven products like ClearCar and ACV MAX are creating deeper, high-value relationships and unique high-margin revenue streams (e.g., pricing as a service), which should boost recurring SaaS/data segment revenue and improve overall earnings quality.
  
• The company's successful commercialization of value-added adjacent services such as ACV Transport and ACV Capital is increasing share of wallet among dealer partners and leveraging network effects, directly supporting both revenue acceleration and net margin improvement as operating scale increases.
  
• Strategic investment in new remarketing centers (greenfield strategy) and a commercial wholesale platform broadens ACV's total addressable market by enabling new commercial and upstream business lines, providing multi-year top-line growth levers that are likely not fully reflected in current valuation.
  
• Industry-wide digital transformation and the rising requirement for transparent, efficient, and ESG-aligned auto remarketing provide long-term volume growth tailwinds for digital-native leaders like ACV, supporting sustained market share gains and top-line growth as legacy auction models decline.

ACV Auctions Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming ACV Auctions's revenue will grow by 20.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from -9.1% today to 7.9% in 3 years time.
• Analysts expect earnings to reach $98.2 million (and earnings per share of $0.61) by about September 2028, up from $-64.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $35.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 45.8x on those 2028 earnings, up from -30.1x today. This future PE is greater than the current PE for the US Commercial Services industry at 26.9x.
• Analysts expect the number of shares outstanding to grow by 2.66% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.03%, as per the Simply Wall St company report.

ACV Auctions Future Earnings Per Share Growth

Risks

• The company is projecting flat to slightly down dealer wholesale volumes for 2025, citing higher dealer trade retention rates and lower conversion rates on its platform, which could signal that used car supply is tightening and result in lower transaction volume growth, negatively impacting revenue growth in the near and potentially intermediate term.
  
• ACV's updated guidance trims its full-year revenue outlook by $5 million at the midpoint due to ongoing macroeconomic uncertainties, such as tariffs, volatile interest rates, and inconsistent market demand, which introduce long-term unpredictability into topline growth and make revenue and earnings more vulnerable to macro swings.
  
• The effectiveness and pace of ramp-up for key long-term growth initiatives-including its greenfield commercial remarketing centers, Project Viper, and deeper partnerships with companies like Amazon-remain largely unproven and are not expected to contribute meaningfully in the current year, while related R&D and OpEx investments are consuming resources now, risking short
• to medium-term margin pressure if monetization lags.
  
• While ACV is investing heavily in new technologies and bundled data services as competitive differentiators, large, well-capitalized incumbents (e.g., Manheim, CarMax) and potential new entrants continue to threaten its market position; if these competitors close the technology gap or improve pricing/policy, ACV may face pressure on take rates, net margins, and share gains.
  
• Long-term industry structural risks-including a future decline in used vehicle turnover (due to electrification, longer vehicle lifespans, or a shift toward shared mobility), regulatory risks (e.g., changing data privacy laws), and the risk of OEMs or large dealers bypassing wholesale channels-could reduce overall sector transaction volumes and compress ACV's addressable market, impacting both revenue and earnings potential over multiple years.

Valuation

• The analysts have a consensus price target of $19.731 for ACV Auctions based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.5, and the most bearish reporting a price target of just $11.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $98.2 million, and it would be trading on a PE ratio of 45.8x, assuming you use a discount rate of 7.0%.
• Given the current share price of $11.25, the analyst price target of $19.73 is 43.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.