TrueCar, Inc. (NASDAQ:TRUE) Analysts Just Cut Their EPS Forecasts Substantially

The analysts covering TrueCar, Inc. (NASDAQ:TRUE) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the eight analysts covering TrueCar provided consensus estimates of US$199m revenue in 2022, which would reflect an uneasy 14% decline on its sales over the past 12 months. Losses are supposed to balloon 41% to US$0.56 per share. However, before this estimates update, the consensus had been expecting revenues of US$260m and US$0.28 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for TrueCar

The consensus price target fell 22% to US$4.13, implicitly signalling that lower earnings per share are a leading indicator for TrueCar's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values TrueCar at US$6.00 per share, while the most bearish prices it at US$3.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it's the idea that TrueCar's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 14% to the end of 2022. This tops off a historical decline of 3.4% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 13% annually. So while a broad number of companies are forecast to grow, unfortunately TrueCar is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at TrueCar. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that TrueCar's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of TrueCar.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for TrueCar going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.