Tuesday, Wolfe Research initiated coverage on Aurora Innovation Inc (NASDAQ:AUR), a company specializing in Level 4 autonomous truck technology, with a Peer Perform rating. The stock, which began trading on NASDAQ at $10 in 2021, has seen a decline of 36% since its debut. However, shares have experienced a significant recovery, surging over 400% from December 2022 lows and are currently up 48% year-to-date (YTD).
Aurora Innovation's stock recently saw a 30% increase last week following news that the Trump administration may relax federal regulations on self-driving cars. As the only publicly-traded company focused solely on Level 4 autonomous trucks, Aurora Innovation is positioned in a unique market niche.
Despite the recent positive momentum, the firm anticipates minimal revenue for Aurora Innovation in the next 2-3 years. However, projections suggest a ramp-up to nearly $1 billion in revenue by 2028 and more than $3 billion by the end of the decade. This forecast is based on an estimated 20,000 trucks, both carrier-owned and Aurora-owned, achieving approximately 1% penetration of the Class 8 truck population in the United States by 2030.
Although the long-term revenue potential for Aurora Innovation appears promising, Wolfe Research expects the company to continue incurring adjusted EBITDA losses in the coming years. It is anticipated that EBITDA will turn positive in 2029 and significantly increase to over $1 billion by 2030. The 2030 revenue estimate of $3.2 billion is 5% below consensus, while the adjusted EBITDA estimate of $1.4 billion is also 5% below consensus.
Based on Wolfe Research's model, Aurora Innovation is currently trading at valuations of 3 times sales and 8 times EV/EBITDA on 2030 estimates. Nevertheless, the firm's discounted cash flow (DCF) analysis suggests a valuation of $5 for the stock today, indicating potential downside from current levels, using a 12.5% discount rate.
The initiation of coverage with a Peer Perform rating reflects Wolfe Research's view of Aurora Innovation's potential for significant long-term growth against the backdrop of medium-term uncertainty and the potential need for additional capital raises.
InvestingPro Insights
Recent data from InvestingPro adds depth to Aurora Innovation's financial picture. The company's market capitalization stands at $11.08 billion, reflecting investor interest in its autonomous truck technology. Despite the recent stock surge mentioned in the article, InvestingPro Tips highlight that Aurora Innovation "suffers from weak gross profit margins" and is "not profitable over the last twelve months." This aligns with Wolfe Research's expectations of continued adjusted EBITDA losses in the near term.
Interestingly, InvestingPro data shows a 6-month price total return of 162.2%, corroborating the article's mention of a significant recovery from December 2022 lows. The stock's volatility, noted in the InvestingPro Tips, is evident in its 3-month price total return of 47.26%, which closely matches the year-to-date performance mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Aurora Innovation, providing a deeper understanding of the company's financial health and market position.
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