On Wednesday, BTIG changed its rating for TrueCar (NASDAQ:TRUE) stock, moving from Neutral to Buy, with a new price target of $3.75. The adjustment follows a significant decline in TrueCar's shares value, which dropped 14% today and 26% over the past week.
The firm believes that despite mixed results in the second quarter of 2024, the core fundamentals of TrueCar are positive. The shortfall experienced by the company was primarily in its OEM incentive business, which is known for its volatility. BTIG sees the recent sell-off as an attractive opportunity for investors to buy into the company.
TrueCar's recent launch of TC+, a fully-digital transaction engine and the first of its kind offered by an automotive marketplace, is a significant development. BTIG expects that TrueCar will be able to monetize this new product at a substantially higher rate compared to its core marketplace offerings.
The company also reported positive dealer count growth for the first time in six quarters, and an 11% year-over-year increase in units per dealer, reaching the highest level since the fourth quarter of 2021. These indicators suggest a shift in the selling environment to TrueCar's advantage, following several years where market conditions were less favorable.
BTIG further justifies the upgrade by pointing to TrueCar's forward EV/Sales ratio, which has fallen to 0.7x. Historically, the firm notes, TrueCar's shares have found a floor around 0.3x and reached a ceiling between 1.5x and 2x, implying that there is more potential for upside than downside at the current valuation levels.
In other recent news, TrueCar, Inc. has reported a 6.4% year-over-year revenue increase to $41.8 million in the second quarter of 2024, along with a significant improvement in adjusted EBITDA profitability.
Despite a malware attack from CDK Global (NASDAQ:CDK) causing an approximate revenue loss of $750,000, the company maintains a robust balance sheet with no debt and substantial cash reserves.
In addition to these financial highlights, TrueCar has launched a promising new initiative, the TrueCar+ pilot program, which already offers over 3,000 vehicles for complete online purchase.
The company has set a revenue target of $300 million by the end of 2026 and continues to repurchase shares, indicating confidence in its financial health.
Furthermore, TrueCar anticipates a rise in OEM incentives revenue in the latter half of the year. However, no specific revenue guidance has been provided for Q3. These developments are part of the company's recent activities and strategic plans.
InvestingPro Insights
Following the recent downgrade in TrueCar's stock, BTIG has shifted its stance to a Buy rating, seeing a silver lining in the company's fundamentals. Complementing this perspective, InvestingPro Tips highlight that TrueCar holds more cash than debt, indicating a strong balance sheet, and boasts impressive gross profit margins of 89.24% over the last twelve months as of Q2 2024. Despite analysts not expecting profitability this year, the company's liquid assets surpass its short-term obligations, providing some financial stability.
InvestingPro Data offers a snapshot of TrueCar's market standing, with a market capitalization of $249.34M and a revenue growth of 8.74% over the last twelve months as of Q2 2024. The stock's price has seen significant volatility, with a 25.68% decrease over the past week, yet it has managed a 16.24% return over the past year. The current price is at 67.16% of its 52-week high, and the fair value estimated by analysts is $3.75, closely aligned with the InvestingPro Fair Value of $3.58. These metrics may present an attractive entry point for investors, as suggested by BTIG's new price target.
For those considering TrueCar's stock, there are additional InvestingPro Tips available that can provide further insights into the company's performance and potential investment opportunities.
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