In a research report issued today, RBC Capital analyst Mark Mahaney downgraded shares of TrueCar Inc (NASDAQ:TRUE) to Market Perform rating and reduced the price target to $9 (from $23), which implies an upside of nearly 30% from current levels. The decreased rating and price target come in the wake of a negative preannouncement of second-quarter results and material reduction in 2015 guidance.
Mahaney wrote, “While we think TRUE has emerged as a leading Online Car platform with a large addressable market, with a differentiated value proposition to both car dealers and consumers, TRUE’s recent execution has exposed potential risks around lack of negotiating leverage vs. car dealers and revenue concentration among affinity partners. Given the material reduction in guidance, we now lack conviction in the company’s growth outlook, the unit economics of its TRUE-branded channel, and its ability to grow non-USAA affinity channels. Hence, we are stepping to sidelines.”
“Our 2015 Revenue/EBITDA go from $287MM/$29MM to $253MM/$4MM, respectively. Our PT goes to $9 based on 2.5x ’16E Revenue of $324MM and 22x ‘16E EBITDA of $26MM. These are first-pass adjustments to our estimates. We will true up our estimates post the August 6th formal EPS call.”, the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a total average return of 24.1% and a 65.5% success rate. Mahaney has a -26.7% average return when recommending TRUE, and is ranked #13 out of 3714 analysts.