Sacking the CEO and at least 100 others may be viewed as last ditch effort to turnaround underperforming TRUE stock
Shares of online vehicle listing platform TrueCar (NASDAQ:TRUE) are surging in Thursday’s pre-market Nasdaq trading after yesterday’s post-close announcement of a strategic restructuring that aims to streamline the organization and improve efficiency amid a challenging environment for the company
In an SEC filing, TrueCard disclosed it was sacking 102 employees, around 24% of its headcount. Joining those now ex-employees is now-former president and CEO, Michael Darrow. He was replaced by COO Jantoon Reigersman.
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While TRUE stock’s performance hasn’t been at all that bad over the last year, down only 10% after recovering most of the losses in the back half of 2022, it’s the longer view that isn’t pretty. Going back five years, or even to its initial listing in 2014, and we can easily see how much shareholder value has been destroyed.
The chart below from Fintel, illustrates the share price performance and momentum trends in the stock over the last five years to paint this picture.
Aligning Revenue and Costs
The restructuring is driven by the goal of aligning TrueCar’s cost structure with its revenue base, making the company more agile and efficient.
Barbara Carbone, the incoming board chair, explained in the company’s statement that this decision was made after an extensive review to enable TrueCar to achieve its strategic priorities and create long-term shareholder value.
To implement the restructuring plan, TrueCar expects to make non-recurring cash payments of around $7 million, primarily in the second and third quarters of this year, and is expected to save the company over $20 million in costs.
Poor Management Performance
Fintel’s financial metrics and ratios page for TRUE shows the declining performance in management’s effectiveness stems back to early 2022.
This chart and form of analysis helps show the true underlying performance of a company’s management team on a rolling basis, even if the business seems sound from a sales point at the top line.
The company highlighted that it recently reported $146.5 million of cash and cash equivalents on the balance sheet, which management expects could fall below $125 million in the near-term.
However, they maintained an optimistic outlook, expecting to reach breakeven or positive adjusted EBITDA and achieve double-digit, year-over-year revenue growth in Q4 of this year. The move could dramatically change the sentiment for the stock, removing the overhang of selling pressure.
In TrueCar’s most recent Q1 results the company reported sales of $37 million, falling short of consensus forecasts by around $2 million. Profit levels generated by the group were also behind expectations.
What’s evident, however, from TRUE’s Earnings page on Fintel, is that the Santa Monica, California-based company has been underperforming market EPS forecasts for almost every quarter since the beginning of 2022.
Analyst Weight In
BTIG analyst Marvin Fong caught up with TrueCar’s management following the announcement, telling clients that he believes the firm will be nimbler and more focused going forward.
The analyst noted that the company held off reducing headcount during 2022 and thinks the layoffs were overdue. He also hinted that the actions may have been released ahead of the annual shareholder meeting slated for next week for a reason.
BTIG maintained its ‘buy’ call on the stock and $3.50 target price.
Fintel’s consensus target price of $3.51 suggests most analysts see value in the stock that closed Wednesday at $2.47 a share. That implies a 40% rise over the next year if the turnaround proves a success.
With the new restructuring plan and leadership change, TrueCar is embarking on a new chapter. The appointment of Reigersman from the COO role brings a fresh perspective and clear vision for the company’s future.
TrueCar will host its annual shareholder meeting next Thursday on June 22.
The post TrueCar Scrambles With Management Shake-up, Workforce Reduction Ahead Of Shareholder Meeting appeared first on Fintel.
