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Why TrueCar Stock Crashed after Its Solid Q3 Earnings Results


Jul. 16 2019, Updated 2:48 p.m. ET

TrueCar’s third-quarter earnings results

Digital automotive marketplace TrueCar (TRUE) reported its third-quarter earnings results after the market closed on November 6.

In the third quarter, the company’s adjusted EPS stood at $0.04, double its EPS of $0.02 in the third quarter of 2017 but lower than analysts’ consensus estimate of $0.05.

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Key highlights from the third quarter

In the third quarter, TrueCar’s revenue rose 13.5% YoY (year-over-year) to $93.59 million but fell short of analysts’ estimate of $93.83.

The company reported adjusted EBITDA of $10.03 million, also missing analysts’ estimate of $10.58 million. Nonetheless, its adjusted EBITDA rose 25.0% YoY with a margin of 10.7% in the third quarter compared to 9.7% in the third quarter of 2017.

TRUE’s third-quarter adjusted net profit was $4.33 million, showcasing rises of 130.4% YoY and 34.8% sequentially. Before its earnings release, analysts were expecting its adjusted net profit to be higher at $4.66 million.

On the bright side, TrueCar’s total dealer count increased 5% YoY, and its market share (XLY) expanded to 5.2% in the third quarter from 4.6% a year ago. Also, the company’s website traffic continued to see a positive trend and reached 8.0 million average monthly unique visitors compared to 7.8 million in the second quarter.

In the fourth quarter, TRUE expects its revenue to be in the range of $95.5 million–$97.5 million and its adjusted EBITDA to be in the range of $10.0 million–$11.0 million.

Will the stock continue to fall?

Almost all TrueCar’s financial metrics reflected solid YoY growth and consistent sequential growth in the third quarter. However, the company missed Wall Street’s optimistic estimates, which could be the reason for the sell-off in its stock following its earnings event. Nonetheless, TrueCar’s consistent revenue, EBITDA growth, and expanding market share and EBITDA margin could help it regain investors’ confidence in the medium term.

On November 7 at 9:12 AM EST, TRUE was down 12.5% in the premarket trading session. On November 6, TrueCar, AutoNation (AN), CarGurus (CARG), and Carvana (CVNA) had returns of 0.9%, -2.8%, -4.9%, and 0.0%, respectively, month-to-date.


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