Please ensure Javascript is enabled for purposes of website accessibility

Here Are the Key Reasons TrueCar Opened 22% Lower Friday

By Daniel Miller – Updated May 10, 2019 at 1:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A widening loss, lowered guidance, and weak traffic are likely contributing to TrueCar's share-price decline.

What happened

Shares of TrueCar (TRUE -1.86%), an online automotive marketplace providing pricing transparency and connecting consumers with certified dealers near them, opened trading Friday 22% lower from the prior day's close after the company issued its first-quarter results. The stock is down 13.3% as of 1 p.m. EDT.

So what

First-quarter revenue increased 5.6% compared to the prior year, to $85.6 million, which was slightly better than analysts' estimates. On the bottom line, a loss of $0.14 per share was wider than analysts' estimates of a $0.10 loss per share. When adjusted for one-time items, TrueCar's EPS was roughly breakeven, which topped analysts projections for adjusted EPS loss of a penny. Management also lowered its full-year 2019 outlook, with revenue now expected to be in the range of $361 million to $375 million and adjusted EBITDA to land between $27 million and $36 million. Guidance issued during the fourth quarter of 2018 was already cautious, with estimates for revenue between $371 million and $378 million, and adjusted EBITDA of $35 million to $40 million. 

Man with a smart tablet showing a vehicle graphic.

Image source: Getty Images.

"Despite our revised outlook for the remainder of the year, we remain enthusiastic about the tremendous amount of innovation going on across the Company," said Chip Perry, TrueCar's president and chief executive officer, in a press release. "We continue to make significant progress on product improvements, empowered by the completion of Capsela [TrueCar's new technology platform], that are designed to enhance the consumer experience, increase engagement, and fuel future revenue growth." 

Now what

Looking past the estimates, standard earnings metrics, and revised guidance, there were other red flags for investors to note. TrueCar's average monthly unique visitors checked in at 7.1 million, which was the second-lowest figure since the fourth quarter of 2016 -- the only lower result in between those two reports was the fourth quarter of 2018. Furthermore, TrueCar's adjusted EBITDA margin continued its sequential decline, from 10.7% during the third quarter of 2018, down to 9.6% during in Q4 2018, and hitting 5.9% during Q1 2019. TrueCar has shed roughly 31% of its value year to date, and management has a lot of work to do if that is to reverse over the next year. 

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends TrueCar. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

TrueCar, Inc. Stock Quote
TrueCar, Inc.
TRUE
$1.58 (-1.86%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.