Why Shares of TrueCar Are Down More Than 13% Today

MarketsMotley Fool

What happened

Online car-buying facilitator TrueCar (NASDAQ: TRUE) is having a tough day on Wall Street after reporting its second-quarter earnings and revising its 2017 forecast late on Tuesday. As of 12:41 p.m. EDT on Wednesday, TrueCar's shares were trading at $16.95, down 13.1% from Tuesday's closing price.

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So what

TrueCar's Q2 numbers, for the most part, were quite good. Adjusted for employee stock-option costs and one-time items, it earned $0.01 per share on revenue of $81.8 million -- slightly ahead of analysts' consensus estimate.

If earnings were good, why is TrueCar's stock down so much today? It appears to be all about the guidance: TrueCar said that it expects third quarter revenue of between $85 million and $87 million. While that would represent a good gain over the $75.1 million it generated in the Q3 2016, it's a little short of the average $87.68 million estimate among Wall Street analysts surveyed by Thomson Reuters.

That was probably enough to kick off a wave of selling when the market opened.

Now what? 

TrueCar has done well since CEO Chip Perry took the helm late in 2015, narrowing losses, expanding its network of partner dealerships, and building out its online offering. Notwithstanding today's volatility, if TrueCar's fundamentals continue to improve, its share price should continue to trend upward over time.

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John Rosevear has no position in any stocks mentioned. The Motley Fool recommends TrueCar. The Motley Fool has a disclosure policy.