TrueCar's Restructuring and CEO Transition Bolster Investor Confidence, Analyst Reiterates Buy

Needham analyst Chris Pierce reiterates TrueCar Inc TRUE with a Buy and a $3.5 price target.

The re-rating came after a company press release detailing internal restructuring, a CEO transition, and a reiteration of guidance for breakeven or positive adjusted EBITDA in 4Q FY23.

Specific to the restructuring, the analyst received the most investor questions on TRUE's ability to hit breakeven or positive adjusted EBITDA, despite guidance for only double-digit revenue growth in 4Q. 

His confidence in TRUE's ability to hit this profitability goal increases with TRUE flagging a $20 million lower operational expenditure run-rate post the changes. 

The analyst views Jantoon Riegersman's appointment to CEO as a natural transition from CFO to COO and now CEO and views him as a familiar, steady face for investors as TRUE transitions towards a more digital future. 

The price target reflects a modestly higher multiple vs. peers as the new vehicle macro improves and helps TRUE add dealers back to their network and drive more new vehicle transactions. 

The analyst made no changes to his model at this time, but the target makes TRUE look more attractive when considering the improving macro tailwinds for their business.

Pierce's March upgrade reflected four factors, two offensive, and two defensives. On the offensive side of the ball, TRUE's leverage to improve U.S. new vehicle sales and improving business model dynamics would help bring dealers back onto the platform and better monetize those dealers. 

On the defensive side, TRUE's cash balance and potential strategic interest represent downside protection. 

The analyst is bullish on the macro tailwinds behind TRUE, and improved profitability metrics increase his willingness to be patient as TRUE rebuilds its dealer network.

Price Action: TRUE shares traded higher by 8.08% at $2.67 on the last check Thursday.