2 Reasons TrueCar, Inc. Is Still a Buy After Rising 150%

TrueCar, Inc. (NASDAQ: TRUE) has gotten itself back on track after a nightmarish 2015, and it has since rewarded loyal shareholders brave enough to hang on during the two-year roller-coaster ride. And while investors might be hesitant to buy in after its run-up over the past year and a half, let's consider two reasons the company is healthy and may have more upside left -- and also one concern for long-term investors to keep in mind.

One of the pillars of TrueCar's financial success is its affinity groups. Basically, TrueCar powers and operates partners' car-buying programs, and its affinity-group partners include USAA, Chase, American Express, Consumer Reports, AARP, and Sam's Club, among many others. These are huge business partners for TrueCar, and unlike with individual customers, they often come with medium- to long-term contracts.

For example, TrueCar's most important affinity partner is USAA. In the quarter ended March 31, USAA generated 30% of all units purchased from TrueCar -- but that's both a good and bad thing. On the good side, USAA owns nearly 10% of TrueCar's outstanding common stock, which means it's invested in achieving a successful partnership. Moreover, its contract with USAA runs through Feb. 13, 2020, locking in a substantial partner for the near term. But on the bad side, as USAA represents a huge part of TrueCar's business, it would be devastating if the partnership were ever to dissolve.

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Source: Fool.com