Weakness in TrueCar (TRUE) on CNCDA Suit Appears Overdone - Cowen

Cowen and Company comments on TrueCar (Nasdaq: TRUE) following news that the California New Car Dealers Association (CNCDA) filed a lawsuit against TrueCar on behalf of its roughly 1,100 dealers alleging TRUE is non-compliant with auto dealer regulations.

Cowen analyst John Blackledge offered the following observations and outlook:

The CNCDA seeks a declaration from the courts as to whether TRUE qualifies as a dealer or autobroker under law. TRUE spoke with CA regulators as recently as last fall, and the regulators did not request any change to business practices. Roughly ~50 percent of the 1.1K dealers that make up the CNCDA are part of the TrueCar Dealer Network, and TRUE believes the association made the decision to file suit on its own.

The lawsuit does not seek any monetary damages, but asks the courts to determine if TrueCar is complying with California law, and if not, to make the appropriate changes to its business to be in compliance. Management firmly believes its business is not violating California law, and maintains an open dialogue with regulators in the state.

TRUE shares were down nearly 7 percent off the news of the lawsuit. At this point, the stock weakness appears to be overdone. We will provide updates on the lawsuit as they come.

Cowen has TRUE at Market Perform with a price target of $19.

For an analyst ratings summary and ratings history on TrueCar click here. For more ratings news on TrueCar click here.

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