TrueCar, Inc. (TRUE) shares rose more than 15% during Wednesday's session after B Riley upgraded the stock to Buy with a price target of $5.00 per share. Analyst Lee Krowl believes that cost cutting, product initiatives, and cash provide a "favorable setup" for the stock. While TrueCar still has to handle macro volatility and the loss of USAA as its key Affinity partner, recent industry data points reinforce that auto sales bottomed in April and improved throughout May.
In late May, TrueCar reported higher-than-pre-COVID online auto sales going into the Memorial Day weekend. Purchase intent for new vehicles compared with used vehicles rose 9% in the post-COVID-19 period. The trends suggest that there may be significant pent-up demand for autos in the United States following the COVID-19-driven lockdown measures.
During the first quarter, TrueCar reported revenue that fell 2.5% to $83.5 million, beating consensus estimates by $1.5 million. Non-GAAP net income of four cents per share beat consensus estimates by eight cents per share.
From a technical standpoint, the stock the stock briefly broke out from the 200-day moving average and prior highs of around $3.48. The relative strength index (RSI) is approaching overbought levels with a reading of 67.64, but the moving average convergence divergence (MACD) remains in a bullish uptrend. These indicators suggest that the stock could see some consolidation before resuming its move higher.
Traders should watch for consolidation around the 200-day moving average and prior highs of around $3.48 over the coming sessions. If the stock breaks out, traders could see a move toward trendline resistance at around $4.00 or a move to retest 52-week highs of $5.66. If the stock breaks down, traders could see a move toward trendline support near $3.00 or the 50-day moving average at $2.51.
The author holds no position in the stock(s) mentioned except through passively managed index funds.