Is Aurora Innovation operating at a loss - is its high valuation questionable?
In the realm of self-driving technology, Aurora Innovation (Nasdaq: AUR) is making waves, aiming to revolutionise the $987 billion US trucking market in 2023. However, the company's ambitious plans are not without their hurdles.
Based in the USA, Aurora Innovation is a technology company that has been mapping and testing its self-driving truck technology on various highways across the country. As of now, the company has managed to map and test fully a 200-mile stretch of highway, with a few hundred additional miles in development. However, the primary concern of analyst Sahm Adrangi is that Aurora Innovation's bespoke system requires mapping of the 50,000 miles in the US Interstate Highway System, a task that has only been partially completed.
The incomplete mapping of the US Interstate Highway System is a major flaw in Aurora Innovation's self-driving truck technology, according to Adrangi. He argues that this reliance on mapping each mile of the highway system is a time-consuming and costly process, potentially hindering the company's commercial viability.
Aurora Innovation's self-driving trucks can only operate on highways, requiring goods to be delivered to and from special terminals. This additional cost makes trips using Aurora's technology more expensive than using ordinary manned trucks for all but the very longest journeys.
Despite these concerns, Aurora Innovation remains optimistic. The company argues that self-driving trucks will cut transportation costs and capture a significant share of the US trucking market. They believe their technology will offer a more efficient and cost-effective solution, especially for long-haul trucking.
However, competition from other firms pursuing similar technology poses a threat to Aurora Innovation's valuation of roughly $10.5 billion. The market seems to be cooling on Aurora Innovation, with the share price down by half from its peak at the start of this year.
Analysts have given Aurora Innovation a consensus rating of 'Moderate Buy' but have not recently provided specific critical comments on the company's commercial earnings situation or detailed critiques of its technology and business model. Notable analyst George Gianarikas maintains a buy rating with a target price of $15 without publicly noted critical points.
Despite the scepticism of analyst Sahm Adrangi of Kerrisdale Capital, some analysts remain bullish on Aurora Innovation. It is suggested to short Aurora at the current price of $5.73, with a cover if it gets above $9.73, offering a potential downside of £950.
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