Goldman Concerned With TrueCar Headwinds, Removes From 'Conviction Buy' List

Shares of TrueCar Inc (NASDAQ: TRUE) are down almost 35 percent on Friday after the company preannounced negative second-quarter results and trimmed its full year guidance on the back of considerable softness across the business. The actual figures will be announced on August 6.

In a report rolled out Friday, Goldman Sachs analyst Debra Schwartz and her team looked into the preannouncement and concluded that headwinds are bigger than expected. Consequently, they removed the stock from the firm’s “Americas Buy List” and assigned it, instead, a Neutral rating and $8.00 price target, down from $17.00.

The Numbers

According to preannouncement, revenue is expected at $65-$65.3 million, down from a previously expected $67-$69 million. Full year guidance was also trimmed by $30 million at the midpoint to $252-$258 million. The reduced guidance and “potential for further dealer loss, [make] visibility on revenue growth sustainability" uncertain.

The analysts also note that, “Unit volume was significantly weaker than expected and with AutoNation dealers recently exiting the platform and risk of additional losses stemming from outstanding litigation.”

Adjusted EBITDA is projected to be roughly breakeven, as high marketing and product investments coupled with softer top-line performance limited profitability.

For the second quarter, Goldman Sachs’ analysts are now modeling a net loss of ($0.05) per share, well below consensus, which calls for earnings of $0.02 per share.