UPDATE: Morgan Stanley Downgrades TrueCar (TRUE) to Underweight
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(Updated - September 12, 2016 1:57 PM EDT)
Morgan Stanley downgraded TrueCar (NASDAQ: TRUE) from Equalweight to Underweight with a price target of $6.40 (from $5.00), implying downside of 28%. Analyst Brian Nowak thinks shares are expensive.
"We are downgrading TrueCar to UW with a new $6.40 PT (28% downside) as TRUE has appreciated ~80% from its February lows...all driven by multiple expansion. TRUE's multiple has expanded in expectation of a turnaround...even as fundamentals (in our view) have continued to deteriorate. Indeed, 2017 Consensus adjusted EBITDA estimates have fallen by 70% and TRUE's EV/Revenue multiple has expanded by 100+% to 2.5X," said Nowak.
"TRUE is now the most expensive stock in our coverage group when looked at on growth-adjusted multiples. We attribute this multiple expansion to the market's expectations that new CEO, Chip Perry (who started in November 2015), will turnaround TRUE with improved net funnel efficiency (traffic conversion) and profitability," the analyst added. "The trouble is, so far conversion has continued falling (See Exhibit 14) and total company unit growth has slowed from 20%+ Y/Y to 1%, led by declines in the TrueCar Branded channel."
Shares of TrueCar closed at $8.83 yesterday.
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