Shares of TuSimple (TSP) are in the spotlight on Tuesday after the stock was named a catalyst driven idea at Morgan Stanley. Analyst Ravi Shanker is expecting "imminent news" from the company on two potential catalysts, namely TuSimple's "Driver Out" test and an update on the Committee on Foreign Investment in the United States, or CFIUS, inquiry regarding the 2017 investment into the company from Sina (SINA).
CATALYST DRIVEN IDEA: Morgan Stanley analyst Ravi Shanker told investors in a research note that he expects "imminent news" from TuSimple on two potential catalysts, namely the company's "Driver Out" test and an update on the CFIUS inquiry regarding the 2017 investment into TuSimple from Sina as part of its Series B fund raising. Shanker expects a final resolution for both these catalysts within the next three months or "potentially as soon as in the next few days/weeks." The analyst named the stock as a catalyst driven idea given the view that a positive resolution, or even updates, on either or both could potentially drive as much as about 50% upside.
Shanker has identified the "Driver Out" test as a key milestone for TuSimple on the "path to demonstrating the commercial viability of autonomous driving not just for the company, but perhaps for the industry." This test will involve running a Class 8 truck on public highways with regular traffic for an extended period, without a human inside the truck. The analyst noted that management seemed "extremely confident and in very good spirits" regarding this catalyst during his recent field trip and demo run. Shanker has an Overweight rating and $75 price target on TuSimple shares.
CFIUS INQUIRY: In a regulatory filing back in August, TuSimple Holdings noted that as previously disclosed, the company filed a notice with the Committee on Foreign Investment in the United States. CFIUS is reviewing the 2017 acquisition of the U.S. business of TuSimple LLC by Tusimple (Cayman) Limited, which was the company's name prior to its deregistration as a Cayman Islands exempted company and domestication as a corporation incorporated under the laws of Delaware.
"The company was recently informed that CFIUS initiated a 45-day investigation period in connection with its review of the 2017 Transaction. It is not uncommon for CFIUS to initiate the 45-day investigation period, and it does not indicate one way or the other whether CFIUS will eventually identify a national security concern with the 2017 Transaction. To date, CFIUS has not advised the company of any determinations regarding the 2017 Transaction. Although the company cannot predict the outcome of the CFIUS review at this time, the company continues to cooperate fully with CFIUS," TuSimple stated on August 16.
PUBLIC DEBUT: TuSimple went public back in April, opening for trading at $40.25. The company is developing autonomous trucks and is planning to roll out a national U.S. autonomous freight network by 2024. Other companies developing vehicle systems specifically for hauling freight include Tesla (TSLA), Daimler (DDAIF), Amazon (AMZN)-backed Embark and Alphabet's (GOOGL) Waymo.
PRICE ACTION: In Tuesday morning trading, shares of TuSimple have gained over 8% to $38.26.
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