TRUE Stock Tanks After Mixed Earnings and Loss of Key Client

TRUE stock is tanking this week after online car-shopping service TrueCar (NASDAQ:TRUE) posted mixed earnings and lost one of its biggest clients in the USAA Federal Savings Bank.

Q4 Earnings a Mixed Bag

TrueCar, an online platform that connects car buyers with a network of certified dealers, posted its fourth-quarter earnings on February 20 in which net loss widened from US$6.4 million a year ago to US$8.8 million this time around. TrueCar lost $0.08 per share in Q4, beating Wall Street’s expectations. Revenue of $89.7 million was down 2% from a year ago but also beat expectations; however, new car sales were down 3%. TRUE stock is currently trading for $3.26.

TRUE Stock Tanks on Lost Business

TrueCar’s results were overshadowed by news that the company was losing a major partner in USAA Federal Savings Bank. TrueCar has had a revenue-sharing relationship with USAA for 13 years; 29% of TrueCar’s customers were reffered by USAA.

In its earnings report, TrueCar CEO Mike Darrow said the company was given very little notice of the decision to end the relationship between the two firms, which has led to a 17% dropoff in TRUE stock.

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“To be clear, this announcement does not reflect on the service TrueCar has provided to USAA members over the course of a long and successful 13-year partnership. Ultimately, USAA made it clear to us that they have decided to stop providing the car buying service to their members on October 1 in an effort to simplify their business and focus on core product offerings,” said Darrow. The company is optimistic that it can maintain its adjusted EBITDA margins despite losing USAA as a partner, but it remains to be seen if this will halt the slide in TRUE stock.

As a result of the lost business, corporate litigators at Bronstein, Gewirtz & Grossman, LLC are investigating potential claims on behalf of purchasers of TRUE stock to see whether TrueCar and its officers and/or directors were in violation of federal securities laws.

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