Wejo Stock: Pure Play on Connected Car Data Analysis
A few days ago, we introduced you to seven companies using geospatial intelligence to disrupt the insurance industry. This was just one example of how location analytics can develop new markets from all the data generated in our highly digitalized world. In this case, the data mainly comes from images collected by satellites, drones and manned aircraft. But there are plenty of other alternative data sources to tap into for location intelligence, which is more or less synonymous with geospatial intelligence. One that we’ve been talking about for some time is Connected Vehicle Data.
What is connected car data?
Many cars today are essentially sensors on wheels that are constantly connected to the internet through high-speed mobile networks, which is only expected to accelerate as 5G comes online. Almost all components are equipped with a sensor – the throttle, steering wheel, transmission, headlights and much more. This allows for all kinds of information about what is going on inside and outside the car, from occupancy of the vehicle to force in the corners. Connected vehicles can then provide details on road conditions, traffic patterns and a ton of other things that big brains who have opted for degrees other than MBAs can refine from the data.
It should be noted that this is related to but different from other types of connected car data that comes from specialized hardware or, more commonly, smartphones. These devices reveal all kinds of relevant details about driver behavior, such as whether someone is paying attention, stepping on metal, or cleaning their nose. Regardless of the data source, the goal is the same: to make money.
What can you do with the data from the connected car?
And there’s a bunch of connected auto tech companies out there trying to monetize all of this delicious data. Safety and traffic management are obvious use cases for the smart cities of tomorrow, and insurance companies are ready to cut rates for drivers who are ready to be watched whenever they are behind the wheel. . Connected cars can provide precise data on the location, condition, health and trip history of the vehicle for fleet management. Of course, advertisers are always hungry for data, so imagine having access to information about where cars are going. This could influence the location of notice boards or push notifications that appear on your smartphone. In other cases, data from connected cars can help automate parking fees or road tolls through third-party applications. And the list continues.
If this all sounds vaguely familiar to you, it’s because we wrote about a pure-play connected car data company called Otonomo (OTMO) earlier this year which announced its intention to go public through a merger with a sspecial pgoal apurchase vscompany (SPAC). Now its biggest competitor, a UK company called Wejo, is also opening the back door to government procurement by merging with a blank check company.
About Wejo Stock
Founded in 2013, the startup has raised more than $ 131 million, with the American automaker General Motors (DG) the name of repute among the handful of investors. Wejo is looking to go public through deal with Virtuoso Acquisition Corp. (VOSO) which will leave the company approximately $ 300 million at closing, valued at approximately $ 800 million. GM doubles the stake by putting more money into the pot, joined by Palantir Technologies Inc (PLTR), a dark corporate data analytics firm that was once CIA-funded and founded by the undisputed billionaire Peter Thiel. We think Palantir doesn’t have to invest in after-sales service, but that’s a whole different story.
Wejo claims to collect 14.6 billion data points and analyze 66 million trips on a network of 11.3 million vehicles live from a supply base of more than 50 million connected cars every day. The grand total currently stands at over 10,000 billion data points on nearly 50 billion trips. In other words, the company has amassed a ton of data on connected cars that it is ready to monetize on a large scale thanks to partnerships with 17 OEMs and Tier 1 suppliers. The cloud platform for this exchange of data is called Wejo ADEPT:
More recently, the company launched Wejo Studio, its own analytics and visualization platform to deliver data insights from connected cars to customers. It offers standardized visualizations of traffic and journeys for a variety of use cases. For example, traffic planners can use it to understand how drivers move through intersections or travel patterns to understand travel trends by time and location. Users can also select specific waypoints such as public buildings or billboards to make decisions about road management or marketing communications by identifying vehicle types and their routes.
Of course, all of this data is anonymized and comes with a nice bow on the top.
Wejo vs. Otonomo
Of course, we have to say whether Wejo or Otonomo is the better company. Frankly, the comparison is irrelevant, as we are not interested in investing in either (more on Wejo below). In our analysis of Otonomo, which is also backed by big names in the automotive world like Avis (AUTO), we noted that this company only had $ 400,000 in revenue in 2020 despite a data flow of 40 million connected cars and 330 billion kilometers (against more than 390 billion for Wejo). With $ 1.3 million in net revenue in 2020 out of $ 4 million in sales, Wejo doesn’t do much better at turning all that data into gold.
Edwin Dorsey, a 20-something graduate and Stanford short seller, made a name for himself with his newsletter The Bear Cave. Apparently, this self-taught oracle of bad business recently explained why Otonomo was the Most underrated PSPC on the market. True investors disagree: Otonomo saw its market value drop by half, from around $ 1.1 billion in August to $ 600 million at the end of October.
One wonders if a similar fate awaits Wejo’s stock.
Should you buy Wejo shares?
Wejo believes that its immediate ttotal aaddressable mMarlet (TAM) is close to $ 60 billion, but has yet to make a significant dent despite nearly 300 “customer and partner deals,” which we don’t think necessarily translate into revenue at this point. The company seems to be making the right choices with the right players. For example, it recently partnered with Microsoft (MSFT) to build a suite of data and intelligence solutions on the Azure cloud platform. The long-term plan is to integrate with Microsoft’s data platform, including “operational data stores, analytics, AI and machine learning, data sharing, governance of data and business intelligence ”.
In a separate agreement, Wejo is working with Palantir and global insurance provider Sompo Holdings (8630.T) use data from connected cars to create new insurance products in the Japanese market. The positive point is that Wejo is looking to diversify internationally. The company also has big plans to go beyond its core market of traffic management to fleet management services, usage-based insurance, remote diagnostics, and more.
The problem is, Wejo has yet to capture his initial market, so what makes us believe he can suddenly perform a hockey stick maneuver in terms of revenue across six more industries in just three years? This is a classic SPAC obfuscation without being able to see the real game plan with the proper SEC documentation. That aside from the fact that we wouldn’t just invest based on the company’s current lack of significant revenue and a market cap south of $ 1 billion. Wejo expects to make $ 4.3million out of $ 10million in sales, so using that last number as a proxy for annual revenue gives us a simple valuation ratio of 80, which is double our threshold. minimum of 40.
In other words, Wejo stock is too rich and too risky to add to our tech portfolio.
We are not saying that there is no real value to be gained from data from connected cars. It’s just that companies like Wejo and Otonomo haven’t figured out how to unlock it yet. They may change in the future. In addition, other companies are working on similar solutions taking different approaches. For example, Streetlight Data processes approximately 40 billion anonymized location records each month from smartphones and navigation devices in connected cars and trucks. It then uses machine learning to analyze this data along with other information such as built-in road sensors. Is this the best solution? Or to Tesla (TSLA) and its hundreds of thousands of connected cars have already won the data race?
Unfortunately, we have no real palantir to see in the future. We can only make decisions based on what lies ahead today, and evidence is scarce in Wejo’s case. If the SPAC merger goes through, Wejo will trade on the Nasdaq stock exchange under the ticker WEJO.
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