Online automotive marketplace TrueCar Inc TRUE reported below-consensus bottom line results for the first quarter Thursday and issued weak second-quarter revenue guidance. The company also lowered its 2019 guidance.
The Analyst
Benchmark analyst Daniel Kurnos maintained a Hold rating on TrueCar.
The Thesis
TrueCar's downward guidance adjustment reflected the absence of the return of a large OEM partner, which is likely Nissan Motor Co Ltd NSANY, Kurnos said in a Friday note. (See his track record here.)
Organic search headwinds persisted, impacting True branded channel and overall traffic, the analyst said.
The company hinted at a recovery in the True-branded used channel as the quarter progressed, Kurnos said.
"Trade was the lone bright spot, reaching 866 rooftops and potentially serving as a service flywheel in 2H19."
Benchmark sees comps beginning to get more difficult in the second half, particularly in the affinity and USAA channels.
The pending USAA renewal in 2020 is expected to keep a ceiling on shares until an agreement is reached, Kurnos said.
TrueCar faces challenges from the testing of Capsella, TrueCar's new technology platform, which limits its ability to increase marketing spend; ongoing search headwinds; and difficult comps, the analyst said.
Yet with most OEM downside now out of the model, Benchmark sees scope for outperformance in the second half should normal spending patterns return.
The research firm lowered its 2019 forecasts to suggest 3-percent year-over-year revenue growth and an 8-percent EBITDA loss, toward the low end of the revised guidance range.
The Price Action
TrueCar shares were down 14.98 percent at $6.13 at the time of publication Friday.
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