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Tusimple IPO: Buy the Autonomous Freight as a Service (AFaaS) Company Founded by Chinese Scholars

Consumer Discretionary / Industrials

Henry Kwon

Equity Bottom-Up

TSP has underperformed NASDAQ by 24.15% since June 30, while other Autonomous Driving Truck themed SPACs HCIC (merger announced with Plus AI) and NGAB (merger announced with Embark Trucks) have underperformed the Index by 1.86 and 1.87%, respectively in the same period. While we would not expect SPACs to begin reflecting the market's sentiment until official shareholder approval is obtained for SPAC mergers, both TSLA and NKLA have not shown similar degrees of underperformance with TSP since the DIDI oversight announcement took place last week, so the degree of TSP's underperformance aligns much more closely with those of NIO and XPEV.To be sure, TSP does have a VIE structure for its China business and that is what we think the market has just noticed in the past week as it ponders the long term implications of the current government oversight issues faced by overseas-listed Chinese stocks (U.S. companies conducting business in China tend to do so via either VIEs or JVs due to regulatory bars). This clearly is not good for TSP's current narrative in the market, but actually TSP is an American company, incorporated and headquartered in the U.S. (Not Cayman Islands) with the U.S. trucking market being its core center of value creation, which should be an overwhelming note of thematic positive at this point in time.In our view, TSP's narrative in the market has failed to maximize its positioning potential in the minds of U.S. investors since its April IPO. By highlighting its owned freight capacity and partnership with Navistar TSP merely highlighted structurally lower potential margins when compared to a pure SaaS provider with universal interface such as Embark Trucks. In the face of mounting concerns over rising Sino-American tensions, the stock was positioned as a China expansion play, while 71% of its owned fleet capacity is in the U.S. with a far bigger proportion of expected revenue growth coming from the U.S. in the foreseeable future, which is in fact what the Navistar partnership should signal to the market. While the trade-off is that TSP is (at least for now, anyways) a captive supplier to Navistar with the attendant margin implications, this implication is not as glaring on a casual glance through TSP's presentation materials and the issue normally should not come into play until at least scaling up is well under way.The short term trading implications for TSP's shares that we see are:<ul>
<li>
Bullish Short Term Scenario: TSP closed below its 50% Fibonacci Retracement level of $55.99 on Friday, at $55.01. If the shares can close above its 10-day EMA of $58.43, then $61.61 at the 38.2% Fibonacci Retracement level can come into play.</li>
<li>
Bearish Short Term Scenario: MACD is showing a bearish posture with RSI at 51.07, suggesting there could be further downside risk from current levels. 50-DMA sits at $45.84, below the 61.8% Fibonacci Retracement level of $50.36. These are likely to be the first support zones.</li>
</ul>Given TSP's short trading history, there are currently no set historical trading ranges, so we would use the Fibonacci retracement for loosely gauging where potential resistance/support zones could be at this point in time.

TSP has underperformed NASDAQ by 24.15% since June 30, while other Autonomous Driving Truck themed SPACs HCIC (merger announced with Plus AI) and NGAB (merger announced with Embark Trucks) have underperformed the Index by 1.86 and 1.87%, respectively in the same period. While we would not expect SPACs to begin reflecting the market's sentiment until official shareholder approval is obtained for SPAC mergers, both TSLA and NKLA have not shown similar degrees of underperformance with TSP since the DIDI oversight announcement took place last week, so the degree of TSP's underperformance aligns much more closely with those of NIO and XPEV.To be sure, TSP does have a VIE structure for its China business and that is what we think the market has just noticed in the past week as it ponders the long term implications of the current government oversight issues faced by overseas-listed Chinese stocks (U.S. companies conducting business in China tend to do so via either VIEs or JVs due to regulatory bars). This clearly is not good for TSP's current narrative in the market, but actually TSP is an American company, incorporated and headquartered in the U.S. (Not Cayman Islands) with the U.S. trucking market being its core center of value creation, which should be an overwhelming note of thematic positive at this point in time.In our view, TSP's narrative in the market has failed to maximize its positioning potential in the minds of U.S. investors since its April IPO. By highlighting its owned freight capacity and partnership with Navistar TSP merely highlighted structurally lower potential margins when compared to a pure SaaS provider with universal interface such as Embark Trucks. In the face of mounting concerns over rising Sino-American tensions, the stock was positioned as a China expansion play, while 71% of its owned fleet capacity is in the U.S. with a far bigger proportion of expected revenue growth coming from the U.S. in the foreseeable future, which is in fact what the Navistar partnership should signal to the market. While the trade-off is that TSP is (at least for now, anyways) a captive supplier to Navistar with the attendant margin implications, this implication is not as glaring on a casual glance through TSP's presentation materials and the issue normally should not come into play until at least scaling up is well under way.The short term trading implications for TSP's shares that we see are:

Bullish Short Term Scenario: TSP closed below its 50% Fibonacci Retracement level of $55.99 on Friday, at $55.01. If the shares can close above its 10-day EMA of $58.43, then $61.61 at the 38.2% Fibonacci Retracement level can come into play.

Bearish Short Term Scenario: MACD is showing a bearish posture with RSI at 51.07, suggesting there could be further downside risk from current levels. 50-DMA sits at $45.84, below the 61.8% Fibonacci Retracement level of $50.36. These are likely to be the first support zones.
Given TSP's short trading history, there are currently no set historical trading ranges, so we would use the Fibonacci retracement for loosely gauging where potential resistance/support zones could be at this point in time.

TSP: SaaS Provider or Trucker, American or Chinese? Identity Crises in the Making

TuSimple Holdings Inc

TSP: SaaS Provider or Trucker, American or Chinese? Identity Crises in the Making