Transport truck road transportation
Source: Pixabay

The Full Truck Alliance (YMM) IPO Is Here, and It Looks Expensive

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Jun. 23 2021, Published 9:57 a.m. ET

On Jun. 22, Full Truck Alliance (YMM) had a successful debut on the stock market. On its first day of trading on the NYSE, Full Truck Alliance stock climbed by double-digits after the company announced that it raised $1.6 billion in the offering. What’s the forecast for YMM stock in 2021? Will the stock rise more after the IPO?

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Founded in 2017, Full Truck Alliance is China’s “Uber of trucks.” It runs a mobile app that connects truckers with shipping customers in China. The company is backed by high-profile investors, including SoftBank Group and Tencent Holdings.

Full Truck Alliance stock has a strong IPO

On Jun. 22, Full Truck Alliance started trading on the NYSE under the ticker symbol "YMM". The stock opened at $22.50—up 18.4 percent from its IPO price—and closed 13.2 percent higher, at $21.50. A total of 82.5 million American Depository Shares (ADSs) were offered in the IPO, at $19 each. Initially, Full Truck Alliance planned to offer the shares at $17–$19. One ADS represents 20 Class A ordinary shares.

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full truck alliance ymm stock forecast
Source: Pixabay

Morgan Stanley, CICC, and Goldman Sachs are acting as lead underwriters for the offering. The underwriters have a 30-day option to buy an additional 12.4 million ADSs from Full Truck Alliance at the IPO price.

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Will YMM stock rise more?

YMM stock was down 5 percent in premarket trading on Jun. 23. In the near term, the stock could see a sell-off as investors book profits. In 2020, Full Truck Alliance’s revenue rose by 4.8 percent year-over-year to $395.5 million. Meanwhile, the company's operating loss expanded to $554 million in 2020 from $155.8 million in 2019.

Full Truck Alliance’s stock forecast

The outlook for Full Truck Alliance stock looks promising. China’s road transportation market was estimated to be worth $951.5 billion in 2020. The transportation of full-truckload (FTL) and less-than-truckload (LTL) shipments accounts for the majority of China’s road transportation market.

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full truck alliance ymm stock forecast
Source: Pixabay

Is YMM stock overvalued?

The Full Truck Alliance IPO valued the business at $20.8 billion, but that spiked to $24 billion after YMM stock surged on its debut. The stock is now trading at a 2020 price-to-sales multiple of 61x. Considering that U.S. trucking companies USA Truck and Old Dominion Freight Line have next-12-month EV-to-sales multiples of 0.5x and 5.8x, respectively, YMM stock looks overvalued.

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YMM stock is a good long-term investment, but not at this price

Full Truck Alliance could continue to benefit from the surge in e-commerce and package delivery amid the COVID-19 pandemic. Approximately 1.4 million shippers posted orders on the Full Truck platform in Mar. 2021. YMM's institutional investors include Invesco, Fidelity, and Abu Dhabi-based Mubadala Investment.

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YMM versus Uber

YMM offers a digital platform that connects truckers with commercial shippers in China, similar to how Uber connects drivers and ride-sharing customers. Full Truck platform covers 300 cities and around 100,000 routes in China.

Uber went public in 2019 at $45. Currently, the stock is up 9 percent from its IPO price. It has a market capitalization of $92.1 billion, and trades at a next-12-month EV-to-sales multiple of 5.4x.

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