By Jason Galanis
TrueCar Inc.’s shares have plummeted a spectacular 36% following an announcement from the company that it was going to miss its second quarter financial projections. The Santa Monica based automotive pricing company announced that it expected to fall short of its revenue projections of $67 million to $69 million by up to $4 million, and that this would be compounded by disappointing sales for the rest of the financial year.
TrueCar Inc. blamed slow sales and slow online traffic in addition to a greater expenditure on marketing and recruitment that was initially planned. CEO Scott Painter expressed regret at the outcome and said that the move had made the company rethink its strategy in order to properly prioritize spending and improve cost management. The company is expected to post a second-quarter loss of between $15 million and $15.5 million.
The announcement was a surprise to investors after Mr. Painter had earlier announced positive projections for the company, suggesting that the company was headed for rapid growth and was expected to be involved in 40% of new-car sales transactions. At the current time, TrueCar is only connected to about 4%. Mr. Painter announced that TrueCar’s yearly revenue will amount between $252 million and $258 million, representing a 10% to 11% decrease from its target range of $280 million to $290 million.
Some investors and analysts expressed severe dissatisfaction with the outcome, especially since earlier projections had been so positive. Analysts have commented upon the blind optimism with which some new Internet companies project their results without the proper tools to do so, and have suggested that significant changes need to be made to the way these companies measure their sales and growth. The recent drop marks another blow for the company following their dissolved partnership with automobile dealer AutoNation, which is expected to lose TrueCar around $7 million in annual revenue.