This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why TrueCar's IPO Looms as a Bear-Market Test

Stocks in this article: TWTR TSLA

I saw first-hand how easily TrueCar can save a consumer thousands of dollars. Quite unaware I'd be writing about the experience, I looked for a Hyundai and found the car I wanted on TrueCar for a little less than $24,941. Edmunds delivers the same car for "price promise" of $27,652.

TrueCar now has enough market power that dealers are used to it: I walked into the dealer where I leased another Hyundai in 2011, asked if they would accept the TrueCar price, and they said yes on the spot. They even threw in an owner-loyalty bonus TrueCar hadn't included -- but said accepting all the incentives would mean I couldn't get interest-free financing.

So for consumers, TrueCar's a no-brainer. What about investors?

The company boosted revenue to $134 million last year from $79.9 million in 2012, and while its net loss was $25 million, it made $2.1 million in profit before interest, taxes, and non-cash charges.

Best of all, the revenue jump was achieved with only a $5 million jump in expenses. And that's logical. Consider how I found TrueCar: In a Google search, it came up at the top of the "earned,'' or not paid-for, search results. That's a recipe for not having to boost ad spending as much as revenue keeps growing, an important long-term key for Web companies trying to make money.

In a hotter market, this is exactly when you take a company public, where TrueCar's proposed valuation of nearly $1 billion wouldn't be a big problem. It's the point where it's hard to deny that the company is on the cusp of profitability, and yet early enough to avoid being valued as a mature business.

It has its risks -- Twitter (TWTR) was also unprofitable but approaching positive cash flow when it went public, and the stock has soured after its early surge. But as Twitter's early reception shows, a confident market snap this kind of deal up.

But this is not, lately, a confident market. All sorts of high-growth Web and tech stocks have been beaten up, from older companies such as Tesla (TSLA) to newer IPOs such as Twitter.

If TrueCar comes out on the wrong day, it might be available at a price you'd want to exploit. Or if the market is happy, it might shoot to a place where it's smart to let the hedge funds have their first-day pop and wait for the shares to be cheaper later.

It could go either way. The point here is that the way it does go will tell us more than any Washington speech about what the state of Wall Street's confidence is right now.

>>Read More: Geithner's Most Candid Crisis Moments as Told to Jim Cramer

>>Read More: Gannett Turns the Page and Continues the Transformation

At the time of publication, the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs