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Here’s What’s Making TuSimple’s Ride Bumpy in 2022
Stock Analysis & Ideas

Here’s What’s Making TuSimple’s Ride Bumpy in 2022

Story Highlights

Concerns about the safety of autonomous driving continue to hang ahead of TuSimple’s second quarter numbers today.

Autonomous technology company TuSimple’s (TSP) $1.8 billion initial public offering (IPO) was one of the major listings of 2021. Since listing at $40 per share and rising to a high of $71.2, its shares have dropped massively, trading at $8.99 at present. TSP’s second-quarter numbers are expected after the market closes today, even as worries about its self-driving technology and investigations continue.

The Street expects the company to post a net loss per share of $0.55 today. In the year-ago period, it had incurred a net loss per share of $0.64, significantly wider than the Street’s estimate of $0.39.

What’s Ailing TuSimple

TSP is focused on developing self-driving technology specifically for the trucking segment. A bet on self-driving trucks is generally perceived as safer compared to passenger vehicles, which necessitate more maneuvering on city roads.

In April this year, a truck utilizing TSP’s tech slammed into a concrete barricade at 65 miles per hour. The incident is being investigated by regulators and raises concerns even as the company eyes market delivery.

The truck had two operators aboard, and while TSP cites human error, disclosures indicate its tech is to blame as well. The company noted on July 26 that the operators “incorrectly reengaged the autonomous driving mode without completing all the necessary steps to safely reengage, and this is the first time in seven years that such an incident has occurred for TSP.”

In response, the company has grounded its entire autonomous fleet and is undergoing an independent review. Consequently, it has upgraded its systems with new automated system checks to prevent the possibility of such an incident from occurring again.

Nonetheless, other issues continue to impact the company’s shares, which are already down 75% so far this year. According to the Wall Street Journal, the company conducted its driverless test (Ghost Rider) in December without completing its goal of 500 practice runs. Meanwhile, employees had raised safety concerns earlier and some have departed. This includes the company’s CEO and CFO,  as well as the top safety officer in charge.

Analysts’ Take on TSP

Despite these overhangs, the Street is buoyant on the stock, with a Strong Buy consensus rating and an average price target of $22.17. This implies a massive potential upside of 146.61%.

Cathie Wood Bets Big On TSP

Along with the Street, hedge funds, too, seem to have brushed off these concerns and have picked up 3.3 million TSP shares in the last quarter, implying a very positive hedge fund confidence signal in the stock.

Moreover, Cathie Wood’s ARK Investment Management has upped its TSP stake by nearly 32%, to around $158.8 million.

Closing Note

TSP’s shares have nosedived as investors look for safer names that are churning profits or cash flows as the Fed remains aggressive this year. A buoyant view from analysts as well as hedge funds may sound reassuring, but investors may need more from the company’s results today to become optimistic about TSP.

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