Wejo Stock: A Small Company With Huge Potential (NASDAQ:WEJO)

Generic autonomous concept car

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Investment Thesis

Wejo (NASDAQ:WEJO), a leading connected vehicle data company went public last year through a SPAC merger with Virtuoso Acquisition Corp. The General Motors (GM) and Palantir (PLTR) backed company initially spiked from $10 to over $19 a share but then quickly plummeted. It got caught up in the massive high-growth tech sell-off and is now trading at $1.88, down over 90% from its all-time high. I believe the sell-off is overdone as the company’s fundamental remains solid. Vehicle data has massive potential as the number of connected cars is increasing and Wejo is able to leverage the data collected and provide unique insight into how vehicles behave and operate. Which is then able to help different companies operate more efficiently. The industry is still in the early innings and Wejo has a strong first mover and data advantage. I believe the stock is a buy at the current price.

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Data by YCharts

Introduction

Data is one of the most important assets in the 21st century. Almost every data from our phones and computer are being collected by companies like Google (GOOG) (GOOGL) and Apple (AAPL). With an increasing number of cars being manufactured are connected cars, Wejo (WEJO), a leading connected vehicle data company founded in 2014 started to collect data from these vehicles to offer innovative products and services to revolutionize the way we live, work, and travel. The company works with different OEMs (Original Equipment Manufacturer) like Ford (F), General Motors, Lucid Group (LCID) etc., to onboard over 14 billion data points directly from connected vehicles they manufactured. The data is then used to deliver unique insight into different vehicle behaviors. This is able to provide a lot of useful products and solutions that other technologies are not able to do. The main four products and services Wejo offers are Journey Intelligence, Traffic Intelligence, Vehicle Movements, and Driving Events.

Journey Intelligence

Journey Intelligence provides an origin-to-destination report. it collects unique journey data from millions of connected vehicles, translating billions of data points into easy-to-consume insights. It allows businesses and users to access journey volumes as well as valuable metrics such as average speed and travel times spanning. It helps unlock a deeper understanding of mobility trends which helps businesses make better decisions, innovate, and solve problems more effectively.

Traffic Intelligence

Traffic Intelligence is the future of traffic reporting which simplifies traffic trends by using data collected. Data is able to be easily translated into insights about directional traffic volumes, traffic flows, average speeds, and congestion. Wejo is also expanding the coverage area for traffic data to further enhance the accuracy and density of its Traffic Intelligence.

Vehicle Movement

Vehicle Movement helps understand where cars are traveling to, from, and through in real-time to help manage congestion, plan for major events, and identify high-footfall locations. Wejo’s data is able to provide location and journey information using its data, for example knowing how many cars are on the road at the moment and where they are heading to.

Driving Events

Driving Events helps understand how cars are being driven in order to identify where incident usually happens and different hotspots for where harsh braking or speeding occurs. By using its data from the movement of vehicles, it is able to identify when parking spaces are in high demand and the volume of arrivals per hour, per minute, peak times, and parking space performance.

Wejo

Wejo

Opportunities

According to Wejo, the addressable market for the connected car vehicle data industry is huge. The SAM (serviceable addressable market) for Wejo is expected to increase to $60 billion in 2030 and the total connected car vehicle data market is estimated to be at $500 billion. Wejo’s products are able to provide useful solutions for different industries such as automotive, government and infrastructure, fleet and logistics, geographic information systems, and Businesses. Here are a few examples of how Wejo is able to help different industries work more efficiently.

Wejo

Wejo

Automotive

Car data collected allows car manufacturers to adopt more efficiently in an ever-changing consumer and industry landscape. It increases business efficiencies by better understanding the behaviors of drivers and owners. They are then able to optimize marketing spending and also adjust R&D and product development according to specific trends.

Government and Infrastructure

By leveraging Wejo’s data, governments are able to have insight into the usage of different roads, hotspots for car accidents, congestion zones, etc. This enables governments to easily and efficiently prioritize and improve city infrastructure to reduce preventable road incidents, ease congestion and make mobility safer and more sustainable.

Fleet and logistics

Wejo’s data allows fleet and logistics companies to have access to accurate and unique journey data which gives them a deeper understanding of mobility trends, road conditions, traffic patterns, and real-time road insight. Companies are then able to optimize their route by avoiding congestion hotspots and having better planning for their drivers.

The market is expanding as the number of connected vehicles is also increasing rapidly. The number of connected vehicles doubled from 103 million in 2017 to 226 in 2021 and is expected to increase to 396 million in 2025. Currently, Wejo is collecting data from 10 million active connected vehicles, with 9.1 trillion data points ingested already. It is also actively working with 17 OEMs to expand the number of connected vehicles. I believe the number of use cases will continue to expand as the number of data being captured increases over time.

Wejo

Wejo

Financials and Valuations

The company recently reported earnings for the first quarter of 2022 and it is showing strong top-line growth. Net revenue for the quarter is $586 thousand, representing an 86% increase from $305 million in the prior year. This is primarily driven by the strong growth in the Traffic Management product line of the Wejo Marketplace Data Solutions. Gross bookings (total value of new customer deals signed in the period) increased over 300% to $6.4 million and gross billings (billed amounts to customers in the period) increased 138% to $1.9 million. Annual recurring revenue (ARR) is $45 million, a 45% increase. The customer count also increased by 122% YoY. The result shows that the company is able to onboard new customers while increasing engagement from current customers. An increase in recurring revenue will also provide a more stable and visible revenue stream going forward. Like most growth companies, Wejo is still not profitable and posted a negative adjusted EBITDA of $(25.2) million. The net loss was $(40.3) million for the quarter, which showed an improvement of 61% compared to the prior year. The company’s balance sheet remains healthy with around $39 million in cash.

Richard Barlow, CEO, on Q1 results

“We are extremely excited about Wejo’s progress thus far in 2022 as a growing number of premier customers recognize the power of our platform and the impact it can have on their businesses. We have successfully converted that awareness into significant growth in Gross Bookings with a substantial number of new customer deals.

It is very hard to value a company like Wejo as it is still heavily investing in new products, ramping up new customers, and has minimal revenue with negative cash flow. There are very few to no companies in the market that has a similar business to Wejo. The only metric that can be used in this case is the PS ratio. The company guided revenue for 2022 to be over $10 million. Based on the guidance, this will translate to a PS ratio of around 19. This is certainly expensive compared to most established businesses, but I believe the valuation here is not an accurate indicator as the company revenue will be able to increase exponentially once its business starts to get more mature.

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Data by YCharts

Conclusion

In conclusion, Wejo is a very intriguing company with massive potential in my opinion. Just like other data, vehicle data are very valuable and can provide unique insight for other businesses. The connected vehicle data industry is still in its early innings and Wejo is able to have a competitive advantage as it is the first mover and has already collected over 9.1 trillion data points from over 10 million connected vehicles. The connected vehicle data industry is a huge market for Wejo to grow into and the number of connected vehicles will only keep increasing in the future. The company is already able to turn these data into multiple products and provide unique solutions to companies in different industries such as automotive and logistics. These use cases show the value of its offerings and how useful they can be. It is reporting strong top-line growth while onboarding new customers. While it is still posting a net loss and is valued quite expensively, it is worth noting this is still a company operating in an early stage. I believe Wejo is a buy as the current market cap is only around $200 million, yet the opportunity is massive, and I believe the company will be able to capitalize on it.

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