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On Thursday, JPMorgan analysts issued a downgrade for TrueCar (NASDAQ:TRUE) stock, moving it from Neutral to Underweight, with the stock currently trading at $1.79. The firm outlined concerns over the company’s current trajectory, citing multiple transitions that pose execution risks. According to InvestingPro data, the stock has declined nearly 47% over the past six months, reflecting these concerns. TrueCar, known for its car-buying platform that leverages both proprietary and third-party data alongside analytics, is focused on creating a transparent and user-friendly tool for consumers.
Despite the innovative approach, JPMorgan pointed out challenges TrueCar faces, such as developing a new digital consumer experience, expanding its Original Equipment Manufacturer (OEM) and Trade businesses, and replacing the void left by the loss of the USAA partnership. While the company maintains impressive gross profit margins of 85% and a strong current ratio of 4.11, indicating solid operational efficiency, TrueCar has recently formed a new partnership with Navy Federal Credit Union in an attempt to fill this gap.
The analyst’s commentary highlighted the potential difficulties TrueCar may encounter due to the recently announced tariffs. These tariffs are expected to present a tougher cyclical backdrop, which could hinder TrueCar’s ability to introduce new products and may lead to delays in revenue from direct OEM programs. InvestingPro analysis suggests the stock is currently trading below its Fair Value, with analyst price targets ranging from $3.25 to $5.00, despite these challenges.
TrueCar’s efforts to simplify the car-buying process have been significant, as the company aims to integrate various data sources and analytics to improve the customer experience. However, according to JPMorgan, the company’s current phase of transition is fraught with risks that could impact its operational performance.
The downgrade reflects JPMorgan’s cautious stance on TrueCar’s stock, as the company navigates through these changes amid a challenging economic environment influenced by new tariffs. TrueCar’s progress in addressing these risks and its success in implementing its new strategies will be closely monitored by investors and analysts alike.
In other recent news, True Corporation reported disappointing financial results for the fourth quarter of 2024, with both earnings and revenue missing analyst expectations. The company posted an earnings per share (EPS) of -0.07 USD, falling short of the forecasted -0.05 USD, and revenue amounted to 46.2 million USD, below the anticipated 47.29 million USD. Despite these setbacks, True Corporation experienced a 2.3% year-on-year increase in service revenue for the quarter and a 4.6% increase for the full year, with EBITDA growing by 12% in Q4. Looking ahead, the company projects a 2-3% increase in service revenue and an 8-10% growth in EBITDA for 2025. True Corporation plans to modernize its network and expand its product offerings, with capital expenditures projected between 28-30 billion THB. The company aims to achieve profitability on a reported basis by 2025, as expressed by Co-CFO Kun Nakul. Despite the current challenges, True Corporation remains committed to strategic growth and operational efficiency, as highlighted in discussions with analysts about spectrum auction strategy and network modernization efforts.
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