TrueCar Inc. shares fell sharply on Friday, erasing more than
$300 million of the company's market value, after the car-shopping
website on Thursday said its results for the current quarter and
year would be worse than thought.
Shares dropped 35% to $6.95 in recent trading. On Thursday
before the warnings, TrueCar shares closed at $10.68. Some analysts
think the stock could fall even farther.
"With dealer lawsuits, questions about attribution, softening
channels and little traction in new products, we believe there is
further downside" for TrueCar, Sameet Sinha from B. Riley & Co.
said in a note after TrueCar's warnings. The firm reiterated its
sell rating on TrueCar and lowered its price target from $9.25 a
share to $5.50. Analysts at J.P. Morgan on Friday downgraded
TrueCar from overweight to neutral.
"The reaction by analysts is to be expected," said TrueCar Chief
Financial Officer Mike Guthrie. "The company didn't perform to both
our and Wall Street's expectations. We must do a better job of
executing to plan going forward."
TrueCar, which trimmed its yearly revenue guidance and said it
expects to post a loss and revenue below analysts' expectations in
the second quarter, has faced two lawsuits from dealers this year.
In March, more than 100 dealers sued TrueCar in a New York court,
alleging the firm was promoting false advertising and unfair
competition. In May, a California dealers association brought a
class-action suit against TrueCar, alleging it was acting like a
dealer but operating without a license.
TrueCar has said in response to the suits that it and its
business practices are compliant with laws. The company said the
suits didn't have a meaningful impact on its second quarter and
likely won't for the longer term, noting that "we are confident in
our ability to prevail in those suits."
TrueCar recently had a falling out with car retailer AutoNation
Inc., which said earlier this month it would cut its ties with
TrueCar following a four-month contract dispute. The company said
AutoNation accounted for 3% of TrueCar's revenue in the
second-quarter.
"The amount of impact AutoNation has on our guidance is small--
if anything," Mr. Guthrie said in a conference call on Thursday,
noting that "AutoNation stores came off the program in the third
quarter and thus did not contribute to the shortfall in the second
quarter."
TrueCar's Chief Executive Scott Painter said Thursday that
TrueCar was facing an "important wake-up call" and that "we clearly
need to focus, prioritize better and show a bit more discipline on
the cost-side of the business."
Write to Cassandra Jaramillo at cassandra.jaramillo@wsj.com
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