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Why TrueCar's Shares Fell 14% in September

By John Rosevear - Oct 7, 2019 at 10:41AM

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Slumping auto sales added to the pressures on the struggling company.

What happened

Shares of online car-shopping service TrueCar (TRUE -1.15%) fell sharply last month, as weakening auto sales exacerbated investor worries following a disappointing second-quarter earnings result.

TrueCar's stock fell about 14.1% in September, according to data provided by S&P Global Market Intelligence. 

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

Image source: TrueCar.

So what

TrueCar's shares were clobbered in August after the company reported earnings that missed expectations and cut its guidance for the full year. TrueCar's earnings fell short after a key automaker partner cut spending on incentives, a bearish sign for the company. 

Concerns about that earnings miss probably contributed to the continued sell-off of TrueCar's stock in September. But investors' worries extended beyond TrueCar, especially after a mid-September report revealed that auto sales in Europe had declined. Shares of TrueCar and several other fairly new companies seeking to disrupt the traditional car-shopping process, including Carvana, CarGurus, and, came under pressure in the second half of the month.

TRUE Chart

TRUE data by YCharts.

Now what

With TrueCar now guiding to year-over-year declines in revenue and earnings for 2019, interim CEO Mike Darrow has his work cut out for him. Not only does the company need to find a way to reassure investors that it has growth (and profits) in its future, it may also need to convince them that it can survive a cyclical downturn -- and soon.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CarGurus, Inc. The Motley Fool recommends TrueCar. The Motley Fool has a disclosure policy.

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