What happened

Shares of online car-shopping service TrueCar (NASDAQ:TRUE) were on the rebound on Monday, after a post-earnings drop on Friday eliminated over a quarter of their value. 

As of 2:30 p.m. EDT, the stock was up about 12% from Friday's close.

So what

TrueCar reported after the bell last Thursday that its second-quarter results had missed Wall Street's estimates as well as its own prior guidance. The company also made a significant cut to its full-year 2019 guidance, saying that this year's results will fall short of 2018's.

The entrance to TrueCar's corporate offices in Santa Monica, California.

Image source: TrueCar.

Investors reacted about as you'd expect: The stock got clobbered in after-hours trading on Thursday. Selling pressure continued on Friday, with the stock down over 37% at one point during the trading day -- but then bargain hunters seemed to step in, and shares ended the week down a mere 27%. 

Despite the additional gains on Monday, as of 2:30 p.m., TrueCar was still down 18.7% from Thursday's close. 

Now what

TrueCar still has a problem. The investment case for the company anticipates revenue and earnings growth, but it has now guided to year-over-year declines in revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in 2019.

Given that the pace of new-car sales in the U.S. is still decent, that decline raises a big question: How will TrueCar fare during the next recession? Investors may not want to stick around to find out. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.