- Needham Analyst Chris Pierce Upgrades TrueCar Inc TRUE from Hold to Buy and a price target of $3.5.
- In the past, about 2/3 of the time TrueCar was used for new car transactions.
- The stock fell out of favor amid weak new car production and sales volume due to problems in the OEM supply chain that caused dealerships to turn away from TrueCar.
- Since the supply of new vehicles was limited, dealers had little reason to pay for sales contacts.
- Now that the analyst is seeing early signs of new vehicle sales and improving inventories, he expects the TrueCar franchise’s (new) dealership count to increase.
- During the 4Q earnings call, TrueCar shared plans to launch three new subscription packages and move away from their old pay-per-sale agreement with dealers. Pierce sees this as a positive, as his dealer reviews often found dealers dissatisfied with the pay-per-sale model and it shaped their overall perception of TrueCar.
- Under the legacy model, dealers would send their monthly sales data to TrueCar, which would match vehicle buyers with customers researching those vehicles on TrueCar’s platform and bill the dealer for those transactions. Dealers, rightly or wrongly, viewed this arrangement as a TrueCar, charging dealer profits after the fact.
- The analyst believes the move to a subscription model will help TRUE re-engage with new traders and traders who have churned.
- Investors have been slow to give TrueCar credit for the strategic moves they’re making with TrueCar+ and their cash balance, but industry participants have taken note.
- AutoNation, Inc A acquired a 6.1% stake in TrueCar in the fall of FY22which reflects the potential strategic interest and validates TrueCar’s current lead generation capabilities while showing confidence in the launch of TrueCar’s digital retail product.
- Price promotion: TRUE shares traded 5.25% higher to $2.11 on the latest check Tuesday.
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