BTIG Reiterates Buy Rating on TrueCar (TRUE)
BTIG analyst Marvin Fong reiterated a Buy rating and $4.50 price target on TrueCar (NASDAQ: TRUE)
The analyst comments "TRUE results largely met our expectations on 4Q24 unit sales and franchise dealers additions, but results came in shy on most P&L items. More importantly, 1Q25 guidance was short of expectations, pressuring shares in the aftermarket by >10%. More specifically, TRUE guided 1Q25 revenue up HSD, short of the Street's +19%. TRUE is also looking for a 1Q25 Adjusted EBITDA loss of (~ $5MM) vs. the Street's expectation for a $1.7MM EBITDA profit. However, TRUE did indicate it is targeting 20%+ revenue growth for all of 2025, which would match Street expectations – in other words, FY25 guidance looks back-end loaded. Management attributed the soft 1Q25 revenue growth outlook on transitioning OEM revenue once American Express (AXP, Sell, $272 PT; Analyst: Caintic) ends its affinity relationship with TRUE in April. The loss of the AXP relationship doesn't come as a surprise as it was telegraphed last quarter, but commentary last quarter suggested revenue disruption could be kept to a minimum. With AXP accounting for ~5% of affinity units, we aren't sure that partnership alone can account for an ~$4MM shortfall vs. 1Q25 revenue expectations. Having said that, we don't view one transitory quarter as too much cause for concern. Unfortunately, investors will also have to sort out the soft EBITDA outlook. The expected EBITDA loss is being driven by elevated investments in dealer sales and service teams to drive growth and we'll look for greater clarity on the call why management is so confident these investments will bear fruit. TRUE did maintain its 2026 year-end target of an annual revenue run rate of $300MM and 10% free cash flow margin and the investment case for the stock has always rested on achieving its end-state goal. TRUE's conference call is at 9AM ET on Feb 19. Our estimates are under review."
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Shares of TrueCar closed at $3.26 yesterday.