Needham downgraded TrueCar Inc. (NASDAQ: TRUE) from Buy to Hold, sending shares down more than 14% intra-day on Tuesday.

The firm said its bullish thesis had not materialized as expected, with TrueCar struggling to capitalize on improving new vehicle inventories. Despite stabilization in dealer counts and transactions per dealer, meaningful growth had yet to emerge.

Analysts cited intensifying competition from used-vehicle lead generation companies that were increasingly targeting the new-vehicle market. They also noted that TrueCar's reliance on new vehicle leads, which was a headwind during the supply shortages of 2021 and 2022, had not yet turned into a sustained advantage.

Needham added that the stock appeared fairly valued, trading at a modest premium to industry peers despite lingering uncertainty around its growth prospects.