Is Aurora Innovation running out of resources? Could its stock be inflated?
In the world of autonomous vehicle technology, Aurora Innovation (Nasdaq: AUR) stands out as a key player in the development of self-driving trucks. With a current market valuation of around $10.5 billion, the company is aiming to capture a significant share of the $987 billion US trucking market in 2023, promising reduced transportation costs.
However, Aurora's journey has not been without its challenges. In 2019, the company reported annual losses of $91 million. Despite years of research and development, Aurora has only managed to map and test a 200-mile stretch of highway, with a few hundred additional miles in development. This extensive time and financial investment required to map the 50,000 miles of the US Interstate Highway System is one of the concerns raised by Sahm Adrangi of Kerrisdale Capital.
Another worry expressed by Adrangi is the commercial viability of Aurora's self-driving technology. While the company argues that its technology will revolutionise the trucking industry, there are concerns about its ability to operate safely in complex environments and secure regulatory approvals.
Competition from other firms pursuing similar technology also poses a threat to Aurora's valuation. Companies such as TuSimple, Waymo Via, Embark, and Plus are among the competitors in the self-driving truck market. The additional costs of using Aurora's technology, which involve high expenses for sensor hardware and software development, may make it more expensive than ordinary manned trucks for most deliveries.
The stock market seems to be cooling on Aurora, with the share price down by half from its peak at the start of the year. Aurora's high valuation based on future profits rather than current earnings makes it particularly vulnerable to shifts in market sentiment.
Despite these challenges, Aurora Innovation remains optimistic. The company claims to have conducted tests on various US highways and is prepared to expand the technology across the country. Aurora's self-driving trucks will only operate on highways and require special terminals for handoff, which may offer a more manageable and safer entry point into the autonomous trucking market.
For those interested in staying updated on Aurora Innovation and the wider autonomous vehicle sector, a subscription to the website's magazine provides exclusive early access to news, opinion, and analysis from a team of financial experts.
Investors are advised to closely monitor Aurora's progress and consider the potential risks and rewards before making investment decisions. It is suggested to short Aurora at the current price of $5.73, with a cover if it gets above $9.73, offering a total potential downside of £950. However, as with any investment, it's crucial to conduct thorough research and consult with a financial advisor.
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