The U.S.-listed Chinese company, which makes most of its money overseas, could rise more than 75%, according to recently updated forecasts from Morgan Stanley. Asia equities analyst Yang Liu and his team not only raised their target price 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 beleaguered shares to “rise higher in absolute terms over the next 60 days.” “This is because the stock has traded recently, making the near-term valuation much more attractive,” Morgan Stanley analysts said, noting Tuya’s quarterly results last week. Tuya shares closed at $1.99 on Friday, down more than 13% for the year so far. The company said its first-quarter revenue rose 30% year-over-year to $61.7 million, driven primarily by sales of cloud-based “Internet of Things” software to lighting and appliance businesses. For example, a hotel can use the Tuya system to remotely set mood lighting in each room. “The net results for the first quarter of 2024 confirmed the upward trend with a much steeper slope,” Morgan Stanley analysts said, noting that Tuya raised its full-year revenue forecast. “The key role will be played by Chinese companies going abroad and becoming global leaders,” analysts say. “Following the 1Q24 results, we believe our previous OW thesis on Tuya is gradually being realized, reflected in fundamental improvements.” More than 80% of Tuya’s revenue comes from outside China, according to a FactSet transcript, while domestic market growth has slowed, the company said on a conference call last week. Management noted that Europe is Tuya’s largest market, accounting for just over a third of total revenue, followed by Asia Pacific. Latin America accounts for nearly 15% of revenue, according to the company. “Our market share is increasing as major competitors exited the market during the industry downturn from 2022 to 2023,” management said. “More and more leading brands are moving from their own IoT developments to our platform.” Tuya is just one of many Chinese companies expanding overseas as their business opportunities improve and domestic growth slows. The company says it became one of Google’s authorized solution providers in 2021 and says it integrated Google Cloud last year. In terms of data security, Tuya announced last week that it has received European Union 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 at its developer conference on May 29 about how it is integrating generative artificial intelligence into its products. The dual-listed company 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 owns just under 20%, according to data obtained through the Wind Information database.
