RBC Capital Starts TrueCar (TRUE) at Sector Perform

RBC Capital initiates coverage on TrueCar (NASDAQ: TRUE) with a Sector Perform rating and a price target of $17.00.

Analyst Mark Mahaney said, "TrueCar has emerged as a leading online channel for new & used car sales. Given a relatively robust valuation and reasonably offsetting investment positives and risks, we are initiating coverage with a Sector Perform rating and $17 PT."

Key Investment Positives: 1) Large Addressable Market – With over $26B of auto-related advertising in the U.S. annually; 2) Differentiated Value Proposition To Car Dealers & Consumers – Informed & transaction-ready consumers for dealers and a transparent, data-rich, trusted process for consumers; 3) Numerous New Growth Opportunities – TrueTrade for used-car trade-ins and TrueLease and TrueLoan could offer consumers more options and lead to incremental revenue streams; and 4) Scalable Financial Model – With 89% current Gross Margins and long-term EBITDA margins of 35%+.

Key Investment Risks: 1) Exposure To The Cyclical Nature Of The Auto Industry; 2) Negotiating Leverage May Lie With Dealer Groups – TRUE has substantially grown its Dealer base and sales intensity over the last two years, suggesting rising Dealer satisfaction, but this will be key to monitor; 3) Revenue Concentration Among Affinity Groups – USAA generates 1/3rd of TRUE’s sales volume, with other affinity partners adding another 1/3rd, so maintaining these partnerships will be crucial; and 4) Ongoing Competitive Risk – Sites such as AutoTrader.com, Cars.com, Autobytel, and Edmunds.com all compete for consumer attention and dealer resources.

For an analyst ratings summary and ratings history on TrueCar click here. For more ratings news on TrueCar click here.

Shares of TrueCar closed at $14.02 yesterday.

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