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TrueCar Makes A U-Turn, Citi Initiates With A Buy On Turnaround Story

Brett Hershman

TrueCar Inc's (NASDAQ: TRUE) turnaround story is already underway, according to Citi analysts. The firm initiated coverage on the online car-buying platform with a Buy rating and a $18 price target.

“We believe the turnaround that management has conducted over the last year is impressive, and shares have reacted as such," Citi analysts said.

Although shares of the stock have gained over 189 percent in the last year, 85 percent of non-TRUE dealers still feel that the TrueCar hasn't positioned themselves well in front of consumers, and Citi believes that's where future opportunity lies.

“We expect dealers to continue adopting the platform and look for dealer growth of 9% CAGR from 2016-2019. On the consumer side, we estimate that TRUE accounted for 2-3% of new and used cars sold in the U.S. last year, and we expect that to trend modestly higher to 3.5% of the roughly 34M cars that will likely be sold in 2019.”

Analysts are increasingly optimistic about growth and new initiates that will enable to increase its conversion over the medium term as the company adds better research content to compete with current market share leaders, Kelley Blue Book and Edmunds. Citi believes there is plenty of room to improve market share in both new and used cars.

The auto industry is seeing more of a transition to used cars, and that bodes well for TrueCar, which is expected to be accretive to company margins, with used cars being monetized at a higher premium for the service.

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Latest Ratings for TRUE

Date Firm Action From To
Mar 2017 Citigroup Initiates Coverage On Buy
Feb 2017 RBC Capital Upgrades Sector Perform Outperform
Jan 2017 JMP Securities Upgrades Market Perform Market Outperform

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