A US-listed Chinese company that makes most of its money abroad could rise more than 75%, according to a newly updated Morgan Stanley forecast. Asian equity analyst Yang Liu and his team not only raised their price target on Tuya stock by 50 cents to $3.50 last Tuesday, but on Thursday they issued a separate note saying they expect the Chinese company's flagging shares to rise “in absolute terms over the course of the year.” “That's because the stock has traded recently, making short-term valuation more compelling,” Morgan Stanley analysts said, pointing to Tuya's quarterly results last week. Tuya shares closed Friday at $1.99, down more than 13 percent. % for the year so far. The company said its first-quarter revenue grew 30% year-over-year to $61.7 million, mainly from selling cloud-based “Internet of Things” software to lighting and hardware companies, for example , using Tuya's system to remotely adjust mood lighting in each room. Morgan Stanley analysts said: “The clear defeat in 1Q24 confirmed the upward trend with a much steeper slope,” noting that Tuya raised its revenue guidance for the full year. “The main play is on Chinese companies going overseas, with a global leadership position,” the company said in an earnings call last week More than 80% of Tuya's revenue comes from outside China, according to FactSet, while growth in the domestic market has slowed. Management noted that Europe is Toya's largest market with just over a third of total revenue, followed by the Asia-Pacific region. Latin America represents approximately 15% of revenue, the company said. “Our market share is expanding as major competitors exit the market during the industry decline period from 2022 to 2023,” the management said. “More leading brands are moving from internal IoT development to our platform.” Toya is just one of many China-based companies that is going overseas as its business capabilities improve and growth at home slows. The company claims to have become a Google Certified Solution Provider in 2021 and says it integrated Google Cloud last year. Regarding data security, Tuya announced last week that it has obtained the EU's General Data Protection Regulation (GDPR) data privacy certification. The company also claims to have data centers in the US, Europe, India and mainland China. At its developer conference on May 29, Toya plans to release details on how it will integrate generative AI into its products. The company, dually listed in Hong Kong, also has a buy rating from Goldman Sachs. The Bank of New York Mellon owns more than 21% of Toya's outstanding shares, while US venture capital firm New Enterprise Associates owns just under 20%, according to records accessed via the Wind Information database.
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Chinese companies are going global. Morgan Stanley shares to play the trend
