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Why TrueCar Stock Was Rising Today

By John Rosevear – Aug 10, 2020 at 11:05AM

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The company's second-quarter earnings were good, but there's more to the story.

What happened

As of 10 a.m. EDT on Monday, TrueCar (TRUE 1.31%) shares were up about 6.1% from Friday's closing price. The stock has gained over 35% since the online car-shopping service delivered a better-than-expected second-quarter report after the market closed on Thursday.

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

Image source: TrueCar.

So what

TrueCar's revenue fell 29% year over year in Q2 to $62.7 million -- a not-too-surprising decline given that U.S. auto sales fell 33% during the quarter -- but the plunge was considerably smaller than Wall Street had expected. As for the bottom line, its adjusted earnings of $0.04 per share soundly beat the $0.07 per share loss that the analysts had forecast. 

There was more for auto investors to like in the earnings report. The company said it had struck a deal to sell its ALG leasing-data subsidiary to J.D. Power for $135 million. TrueCar will receive $112.5 million of that in cash at the deal's closing, and plans to use $75 million of the proceeds to fund a share-repurchase program. 

Not surprisingly, TrueCar's shares jumped more than 30% on Friday morning. 

Now what

Since CEO Mike Darrow took the top job last year, he has put TrueCar on a positive course despite the adversity of the COVID-19 pandemic and the looming loss of a key referral partner at the end of the current quarter. The sale of ALG could turn out to be a great move, allowing the company to monetize an important asset while -- significantly -- retaining access to its data and analytics for five years. 

TrueCar investors have had a rough ride over the last couple of years. The company isn't out of the woods yet, but there are growing reasons to be optimistic, and that's why the stock was rising again Monday morning.

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

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