TuSimple provides self-driving technology for heavy-duty trucks
Courtesy of TuSimple
Shares of TuSimple Holdings , a provider of technology for self-driving vehicles, are up in Thursday trading after an analyst got bullish on the stock—sort of.
Citigroup analyst Christian Wetherbee resumed coverage of TuSimple (ticker: TSP) Wednesday afternoon. He rates shares at Buy with a $40 price target—more than three times the current market price.
Sometimes analysts have to suspend coverage of a stock for a few reasons, such as when the broker they work for is helping a company raise significant capital or advising on a merger or asset sale. Wetherbee didn’t immediately respond to a request for comment about the suspension.
TuSimple stock is up 3.9% to $12.11 in early trading Thursday. The S&P 500 and Dow Jones Industrial Average are down about 0.2% and 0.3%, respectively.
Before he suspended coverage, Wetherbee rated TuSimple stock at Buy. His price target was $60, though. The new price target reflects the reality of what’s gone on with the stock.
TuSimple shares have dropped 65% year to date, and about 84% from their June 2021 52-week high of almost $80 a share. Rising interest rates, inflation, and geopolitical tensions have sapped investor willingness to own more-speculative technology companies such as TuSimple.
The San Diego-based company makes self-driving solutions for heavy-duty trucks. The company is still in its early stages. It doesn’t expect to break $100 million in annual sales until 2024, and won’t be profitable until 2026.positive earnings until 2026 and more than $100 million in sales until 2024.
Self-driving technology is difficult to perfect, but the potential is large. The global market for long-haul freight is about $4 trillion, according to the company. That’s a top-line number, but a lot of that revenue goes to drivers who seem to be chronically in short supply. Any technology that, essentially, improves labor productivity is very valuable for the logistics industry.
A company-specific event also sent shares lower recently. TuSimple announced in early March that co-founder and chief technology officer Xiaodi Hou would succeed CEO Cheng Lu. Lu is serving as an advisor until March 2023 to smooth the transition. Investors reacted nervously anyway, and shares dropped more than 30% in the two days following the announcement.
Wetherbee acknowledged that the management change was greeted with skepticism in his report, but says not much upside is priced into shares now.
“We believe the recent selloff is overdone as the market appears to be pricing in a quite low probability of successful scaling.” His math shows that investors are only assigning a 15% chance of success for the company’s technology. “We’ll take those odds,” added the analyst.
Write to Al Root at [email protected]
