Shares of online car-shopping service TrueCar (NASDAQ:TRUE) were moving sharply higher on Wednesday, after a Wall Street analyst upgraded the stock and said that the company has the right pieces in place to thrive as the economy recovers.
As of 11 a.m. EDT, TrueCar's shares were up about 20.5% from Tuesday's closing price.
In a new note on Wednesday morning, B. Riley FBR analyst Lee Krowl raised his rating on TrueCar's shares to buy, from neutral, and boosted his price target for the stock to $5 from $3.
Krowl said that while he sees challenges ahead for TrueCar, the company has what it needs to move beyond them. On the one hand, he wrote, ongoing "macro volatilty" and the loss of TrueCar's key referral partner, USAA, won't help; on the other hand, the company's aggressive recent cost-cutting efforts, its new-product initiatives, and its cash reserve "provide a favorable setup for shares."
Krowl added that recent data points have reinforced the view that U.S. auto sales probably bottomed in April and improved as May went on.
I agree with Krowl's view that TrueCar is probably through the worst of the coronavirus-induced recessionary storm. I think that auto investors eyeing the company should be aware of the still-significant risks, though -- while noting that there may be additional factors working in TrueCar's favor.
Not only do U.S. auto sales seem to be recovering more quickly than many analysts had expected, but TrueCar's service is particularly well-suited to serve car buyers who want to be able to shop -- and complete a new-car transaction -- without going to a brick-and-mortar dealership.