PONY Stock Is $5. Why Do Analysts Say $20?

Pony AI stock: $5 vs a $20 target

0:00 A year ago, Pony AI stock traded for around $20 a share. Today, it trades for just $5 a share. And Wall Street's average price target is still around $20. So, either 10 analysts are asleep at the wheel, or the market is pricing this robotaxi company like it is a car on fire, when really it might just need some gas. The company is Pony AI, ticker symbol P O N Y. So, what does Pony AI actually do?

What Pony AI actually does

0:23 Pony builds the software that lets a car drive itself, and then it runs robotaxis with nobody in the driver's seat. Already giving paid rides in Chinese cities like Guangzhou and Shenzhen, and it launched fully driverless service in part of Shanghai. Think of it like Uber, except Uber has to split every fare with a driver, and Pony doesn't have a driver to pay, which is great for margins and terrible for small talk. China also happens to be the biggest car market in the world.

0:51 So, if robotaxis take off anywhere, a lot of people think it happens there first. Now, let's talk about the fun part.

The bull case: growth and cheaper cars

0:56 Why the bulls are so excited. Now, I think all the important factors are already in place. Now, we are sort of in the evolution process. It's just launching more, right? The first thing is growth. Revenue is up 46%, so the business is getting bigger even while the stock gets smaller. The second thing is cost. A robotaxi is only a good business if the car is cheap enough, and Macquary expects Pony's hardware costs to drop about 20% while its fleet keeps growing.

1:21 Said another way, every car costs less to build, and there are more cars on the road making money. That's the whole game. The second to last thing is the analyst.

What the 10 analysts say

1:29 Of the 10 analysts MarketBeat tracks, seven rated a buy, two say hold, and only one says sell. Their average target is about $19.57, and at the time of recording this video, the stock closed around $5.02, which means the average analyst thinks the stock could almost quadruple. Bank of America has a target of $17, and even Barclays, which is one of the most cautious analyst on the stock, has a target of $10, which is still about double today's price.

1:52 And the last thing is where the stock sits. The low for the past year is $4.90. So, Pony is trading just above that low and roughly 78% below its high of $22.46.

Why PONY stock is down

2:04 So, if all that is true, why is the stock down about 20% in October alone? Well, a big part of it is mood. It's vibes. Unprofitable AI stocks have been getting crushed, and when the market gets scared, it sells the stocks that don't make money yet first and ask questions later. It's kind of like a house getting cheaper because the whole neighborhood went on sale, not because anything is wrong with that particular house. At least that's what the bulls would tell you.

2:26 Now, here's the date that matters.

Mid-November earnings: what has to go right

2:28 Pony reports earnings in mid-November, and that report is when we find out who's right. For the bulls to win, a few things probably need to show up in that report. First, revenue needs to keep growing and fast because growth is the main reason anyone is paying for this stock right now. Second, the fleet needs to keep expanding with more cars and more cities because more cars on the road is what turns this into a real business. And finally, the losses need to start shrinking or at least show a clear path to shrinking because investors are a lot less patient with money-losing companies than they were a couple of years ago.

2:59 In tough scaling, of course, it's not just a technical challenge. It's also regulatory. It's also user acceptance, branding, uh also ecosystem, partnership.

The bear case: dilution, China, competition

3:10 Now, I have to give you the negative side, the negative Nellie side, the bear case that people probably don't want to listen to. Cuz right, we just want to hear about how great our stocks are and how much they're going to go up and how we're all going to become rich. But, it is my goal on this channel to be as honest as possible, be balanced, right? So, the biggest risk is that Pony is still losing money, and companies that lose money often sell more shares to keep the lights on, which is called dilution.

3:33 And all that I mean is the pizza gets cut into more slices, so your slice gets smaller. The next risk is China. Pony is a Chinese company listed in the US. So, if politics between the two countries get worse, that can hit the stock no matter how well the business is doing. And right now, that relationship is basically on a timer. Last October, Trump and Xi agreed to a trade truce, which basically just means both sides agreed to stop raising tariffs on each other for a while.

4:01 That truce was supposed to run out in November, and in September they pushed it out to January. So, the can got kicked, but it's still the same can. On top of that, a Senate committee passed a bill this summer that would ban Chinese connected cars and their software from US roads starting in 2027. So, if you were hoping Pony would one day give you a ride in Dallas, I wouldn't hold your breath. Now, to be fair, Pony saw some of this coming. It also listed in Hong Kong last November.

4:27 So, if things really got ugly here in the US, it has a backup list to fall back on. And then, there's competition. Pony is up against WeRide and Baidu in China. And eventually, Tesla and robo-taxis could turn into a price war where nobody makes much money.

Cheap stock or stale price target?

4:44 Lastly, remember that some of these price targets were set when the stock was a lot higher. And analysts are usually slow to cut them. So, part of that gap could be a stale target and not a cheap stock. So, what would I actually do here?

What I'd actually do

4:55 My thought is that Pony.ai is a high-risk, high-reward type of investment. And the upside only works if you're comfortable investing in Chinese stocks. If you're comfortable with that Chinese risk. And if you're comfortable investing in a company that's losing money still. I'll be honest, I'm personally not. I don't generally invest in Chinese stocks. If I did decide to buy Pony.ai, then I would keep my position relatively small. So, that way I could sleep at night and not worry too heavily about the Chinese Communist government coming and taking over Pony.ai and slashing the value of my Roth IRA.

5:27 And also, I'd be watching that November earnings report very closely. And remember, I'm a CPA. That means I'm an accountant, guys. I am not your financial advisor. For some reason, I just like to make YouTube videos about stocks. Remember that a price target is just an analyst's opinion about where the stock will be in 12 months. It is not any sort of guarantee, and a lot of the times, they're wrong. Nobody can predict the future, including me, including the analysts, including you.

5:50 We're all taking risks, and hopefully the risks that we're taking have outsized rewards. So now, I would really like to hear from you.

Are the analysts asleep at the wheel?

5:56 Are the analysts correct about Pony.ai, or are they asleep at the wheel? Let me know in the comments, and if you made it this far, thank you so much. Seriously. Now, YouTube has been studying what you watch more closely than I study a balance sheet. So, check out this next video that YouTube recommends for you right here.