Dallas, Texas 07/27/2015 (Financialstrend) – TrueCar Inc (NASDAQ:TRUE) finds itself in a tight spot after shedding more $300 million in market value on remarks by CEO, Scott Painter, that the company is on course to register a wider than expected Q2 loss. The online car shopping company is facing a decline in consumers buying cars through its online portal consequently hurting its profits and revenue.
The sentiments and reaction have already triggered a shareholder Lawsuit in a Federal court as it is alleged the company provided misleading information that caused damages to investors.
TrueCar Inc (NASDAQ:TRUE) expects its revenue to be about $65 million against an earlier given projection of between $67 million and $69 million. The company also expects its full year sales to be lower than expected as traffic to its site remains low. Profit margins have also been affected by the company spending more on marketing than initially planned.
The company expects second-quarter loss of between $15 million and $15.5 million. Second quarter loss essentially paints a different picture to what the CEO had said earlier in the month. Painter had told the Times that the company was headed for rapid growth, which would see it account for 40% of new car sales transactions.
Law Suit against TrueCar
Painter has already admitted that it is a wake-up call for TrueCar Inc (NASDAQ:TRUE) which now needs to focus more on reducing costs of operations as traffic remains low, and profit margins come under pressure. Cowen & Co analysts John Blackledge expects the company to continue investing in initiatives that have the potential to grow the business especially on digital tools.
TrueCar Inc (NASDAQ:TRUE) revenue estimates have mostly been hurt by the country’s largest dealer AutoNation saying it would no longer use the company to route clients to its stores. The move is expected to cost the company about $7 million in annual revenue. California New Car Dealers Association has already filed a lawsuit against TrueCar Inc (NASDAQ:TRUE) over allegations it continue to operate as a dealer and broker in car sales yet it doesn’t have licenses for both.