A US-listed Chinese company that makes most of its money abroad could rise more than 75%, according to Morgan Stanley’s recently updated forecasts. Asia equity analyst Yang Liu and a team not only raised their price target for Tuya by 50 cents to $3.50 last Tuesday, but also issued a separate note on Thursday saying they expect the Chinese company’s beaten-down shares to “in absolute terms” terms will rise above $3.50′. the next 60 days.” “This is because the shares have recently fallen in value, making the near-term valuation much more attractive,” said Morgan Stanley analysts, who noted Tuya’s quarterly results last week. Tuya shares closed at $1.99 on Friday, down more than 13% for the year to date. The company said first-quarter revenue grew 30% year over year to $61.7 million, primarily from sales of cloud-based “Internet of Things” software to lighting and appliance companies. For example, a hotel can use Tuya’s system to remotely control mood lighting in each room. “The 1Q24 clean beat reaffirmed the uptrend, with a much steeper slope,” Morgan Stanley analysts said, noting that Tuya had raised its full-year revenue expectations. “A key role in Chinese companies going abroad, with a global leading position,” the analysts said. “Following the 1Q24 result, we believe our previous OW thesis on Tuya is gradually playing out, as reflected in the fundamental improvements.” More than 80% of Tuya’s revenue comes from outside China, while growth in the domestic market has slowed, the company said on its earnings call last week, according to a FactSet transcript. Management noted that Europe is Tuya’s largest market with just over a third of total revenue, followed by Asia Pacific. Latin America accounts for almost 15% of sales, the company said. “Our market share is growing as major competitors exited the market during the industry downturn from 2022 to 2023,” management said. “More and more leading brands are moving from in-house IoT development to our platform.” Tuya is just one of many China-based companies moving abroad as their business capabilities improve and growth at home slows. The company claims it became one of Google’s authorized solution providers in 2021 and says it integrated Google Cloud last year. On the data security front, Tuya announced last week that it has achieved the European Union’s GDPR data privacy certification. The company also claims to have data centers in the US, Europe, India and mainland China. Tuya plans to release details about how it is integrating generative artificial intelligence into its products at its developer conference on May 29. The company, which is dual-listed in Hong Kong, also has a buy rating from Goldman Sachs. BNY Mellon owns more than 21% of Tuya’s outstanding shares, while US venture capital firm New Enterprise Associates holds just under 20%, according to data accessed through the Wind Information database.
Chinese companies are going global. Morgan Stanley shares are riding the trend
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