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On Thursday, DA Davidson adjusted its outlook on TrueCar (NASDAQ:TRUE), reducing the price target from the previous $4.00 to $3.25, while keeping a Neutral rating on the stock. The revision follows TrueCar’s fourth-quarter financial performance, which fell short of market expectations. The stock, currently trading near its 52-week low of $2.50, has declined over 25% year-to-date. According to InvestingPro analysis, TrueCar appears undervalued at current levels.
TrueCar’s revenue for the fourth quarter of 2024 was approximately 2.3% below the consensus estimates and 1.8% lower than DA Davidson’s own projections. The shortfall was attributed primarily to a slower recovery in OEM Incentive revenues after the company lost American Express (NYSE:AXP) as an affinity partner. While revenue growth in the fourth quarter decelerated to 11.9%, the company maintains impressive gross profit margins of 85%, according to InvestingPro data.
Additionally, TrueCar’s adjusted EBITDA for the quarter was reported at $0.4 million, which was below the consensus estimate of $1.2 million and DA Davidson’s expectation of $1.4 million. Despite these figures, TrueCar succeeded in achieving its target of positive free cash flow (FCF) in the fourth quarter, which amounted to $4 million. The company maintains a strong balance sheet with a current ratio of 4.11 and holds more cash than debt, demonstrating solid financial flexibility. Get access to 13 more key insights about TrueCar with an InvestingPro subscription.
The analyst from DA Davidson commented on the results, noting the impact of the loss of the American Express partnership on the company’s revenue re-acceleration. The analyst’s remarks underscored the slower-than-anticipated growth in a key revenue segment for TrueCar.
TrueCar’s stock price target adjustment by DA Davidson reflects the company’s recent performance and the challenges it faced in the latter part of 2024. The firm’s maintained Neutral rating indicates a cautious outlook on the stock’s potential, awaiting further signs of recovery or growth.
In other recent news, TrueCar has reported its financial results for the fiscal year ending December 31, 2024, revealing that the company’s performance aligned with expectations in terms of unit sales and franchise dealer additions. However, the company fell short on most profit and loss items, and its guidance for the first quarter of 2025 did not meet analyst expectations. TrueCar anticipates single-digit high revenue growth for the first quarter, which is below the projected 19% increase, and an Adjusted EBITDA loss of around $5 million, contrary to the Street’s expectation of a $1.7 million profit. Despite these challenges, TrueCar has reaffirmed its long-term goal of achieving an annual revenue run rate of $300 million by the end of 2026. BTIG analyst Marvin Fong maintained a Buy rating on TrueCar stock, with a price target of $4.50, following the company’s financial disclosures. The company attributes its subdued revenue outlook to the transition of OEM revenue after ending its affinity relationship with American Express, which could result in a $4 million shortfall against first-quarter revenue expectations. TrueCar management plans to discuss the potential for growth from increased investments in dealer sales and service teams during an upcoming conference call.
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