Auto Pair Trade? Long Autobytel, Short Truecar After New Data

B. Riley issued an automotive media industry note highlighting Autobytel Inc. (NASDAQ: ABTL) and TrueCar Inc. (NASDAQ: TRUE) after a recent rally in the sector due to an unusually strong month of February for automotive sales. The firm rates Autobytel as a Buy with a $29 price target and rates TrueCar as a Sell with a $3.60 price target.

Analysts at B. Riley wrote, "Feb 2016 was the strongest February in 16 years for auto sales... TRUE reacted well to the news as guidance implies about +2.5 percent Y/Y growth in unit sales for 1Q16... ABTL did not participate in the rally as, we believe, General Motors Company (NYSE: GM) missed expectations with unit sales at -1.5 percent vs. expectations of +5.6 percent."

B. Riley noted that Truecar's conversion rate has declined significantly while management has de-emphasized used cars, which analysts believe could impact monetization as used car commissions are more profitable than new ones. This could decrease value for shareholders in the near term.

Analysts wrote that while Autobytel counts GM as a major customer, the car company's decline in fleet sales will not significantly affect Autobytel because the company is only leveraged to retail sales. Thus, B. Riley is a buyer of Autobytel.