Wejo Stock: Pure Play on Connected Car Data Analytics
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A few days ago we introduced you to seven companies using geospatial intelligence to disrupt the insurance industry. That was just one example of how location analytics can grow new markets from all of the data being generated in our highly digitized world. In that case, the data mainly come from imagery collected by satellites, drones, and manned aircraft. But there are plenty of other alternative data sources to mine for location intelligence, which is more or less synonymous with geospatial intelligence. One that we’ve been talking about for a while is connected vehicle data.
What is Connected Car Data?
Many of today’s cars are basically sensors on wheels that are constantly connected to the internet via high-speed mobile networks, which should only get faster as 5G comes online. Just about every component is outfitted with a sensor – the accelerator, steering wheel, transmission, headlights, and much more. This enables all sorts of insights of what’s happening inside and outside the car, from vehicle occupancy to cornering force. Connected vehicles can then provide details about road conditions, traffic patterns, and a ton of other stuff that big brains who opted for degrees other than MBAs can tweak out from the data.
We should note that this is related to but different to other types of connected car data that comes from specialized hardware or, more commonly, smartphones. These devices reveal all sorts of pertinent details about driver behavior, such as whether someone is attentive, putting the pedal to the metal, or picking his nose. Whatever the data source, the goal is the same: to make money.
What Can You Do with Connected Car Data?
And there are a bunch of connected car technology companies attempting to monetize all that delicious data. Safety and traffic management are obvious use cases for tomorrow’s smart cities, and insurance companies are willing to cut rates for drivers who are cool with being monitored whenever they’re behind the wheel. Connected cars can provide accurate data on vehicle location, status, health, and trip history for fleet management. Of course, advertisers are always hungry for data, so imagine having access to information about where cars are going. That could influence where billboards are located or what push notifications show up on your smartphone. In other cases, connected car data can help automate parking garage fees or roadway tolls through third-party apps. And the list goes on.
If all this sounds vaguely familiar, it’s because we wrote about a pure-play connected car data company called Otonomo (OTMO) earlier this year that announced plans to go public through a merger with a special purpose acquisition company (SPAC). Now its biggest competitor, a UK company called Wejo, is also taking the backdoor to the public markets by merging with a blank check company.
About Wejo Stock
Founded in 2013, the startup has raised more than $131 million, with U.S. automaker General Motors (GM) the marquee name among the handful of investors. Wejo is looking to go public through a deal with Virtuoso Acquisition Corp. (VOSO) that will leave the company with about $300 million or so at closing, with a value of about $800 million. GM is doubling down by kicking more money into the pot, joined by Palantir Technologies Inc (PLTR), a shadowy enterprise data analytics company that was once funded by the CIA and was founded by the totally uncontroversial billionaire Peter Thiel. We believe that Palantir has no business investing in SPACs, but that’s a whole different story.
Wejo claims to collect 14.6 billion data points and analyze 66 million journeys across a network of 11.3 million live vehicles from a supply base of more than 50 million connected cars every day. The grand total currently stands at more than 10 trillion data points across nearly 50 billion journeys. In other words, the company has amassed a ton of connected car data that it is ready to monetize at scale thanks to partnerships with 17 original equipment manufacturers and tier 1 suppliers. The cloud-based platform for this interchange of data is called Wejo ADEPT:
More recently, the company has released Wejo Studio, its own analytics and visualization platform for providing insights into connected car data for customers. It offers standardized traffic and journey visualizations 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 journey trends by time and locations. Users can also select specific waypoints like public buildings or billboards to make decisions about road management or marketing communications by identifying vehicle types and their journeys.
Of course, all of this data is anonymized and comes with a pretty bow on top.
Wejo Versus Otonomo
Naturally, we have to say something about whether Wejo or Otonomo is the better company. Frankly, the comparison is moot, because we’re not interested in investing in either one of them (more on Wejo below). In our analysis of Otonomo, which is also backed by some big names in the auto world like Avis (CAR), we noted that that company had just $400,000 in revenue in 2020 despite a data stream from 40 million connected cars and 330 billion miles (versus 390-plus billion for Wejo). With $1.3 million in 2020 net revenues on $4 million in sales, Wejo isn’t doing much better in turning all that data into gold.
A 20-something Stanford grad and short seller named Edwin Dorsey has made something of a name for himself through his The Bear Cave newsletter. Apparently, this self-style oracle of bad companies recently made a case for why Otonomo was the most underrated SPAC on the market. Real investors disagree: Otonomo has seen its market value drop by half – from about $1.1 billion in August to $600 million by the end of October.
We wonder if a similar fate awaits Wejo stock.
Should You Buy Wejo Stock?
Wejo estimates that its immediate total addressable market (TAM) is in the neighborhood of $60 billion but has yet to make a significant dent despite nearly 300 “customer and partner agreements,” which we assume doesn’t necessarily translate to revenues at this point. The company does appear to be making the right moves with the right players. For example, it recently entered into a partnership with Microsoft (MSFT) to build a suite of data and intelligence solutions on the Azure cloud platform. The long-term plan is to integrate into Microsoft’s data platform, including “operational data stores, analytics, AI and machine learning, data sharing, data governance, and business intelligence.”
In a separate deal, Wejo is working with Palantir and global insurance provider Sompo Holdings (8630.T) to use connected car data to create new insurance products in the Japanese market. The positive there is that Wejo is looking to diversify internationally. The company also has big plans to move beyond its core market in traffic management into fleet management services, usage-based insurance, remote diagnostics, and more.
The problem is that Wejo hasn’t yet conquered its initial market, so what makes us believe it can suddenly perform a hockey stick maneuver in revenue across six additional industries in just three years? This is classic SPAC obfuscation without being able to see the real game plan with proper SEC documentation. That’s aside from the fact that we wouldn’t invest simply based on the company’s current lack of significant revenues and a market cap south of $1 billion. Wejo expects to net $4.3 million on $10 million in sales, so using the latter figure as a proxy for annual revenues gives us a simple valuation ratio of 80 – double our minimum threshold of 40.
In other words, Wejo stock is too richly valued and way too risky to add to our tech portfolio.
We’re not arguing that there isn’t real value to be had from connected car data. It’s just that companies like Wejo and Otonomo haven’t yet figured out how to unlock it. They may change in the future. Also, other companies are working on similar solutions by taking different approaches. For example, Streetlight Data processes about 40 billion anonymized location records from smartphones and navigation devices in connected cars and trucks every month. It then uses machine learning to analyze that data along with other information such as embedded road sensors. Is that the superior solution? Or has Tesla (TSLA) and its hundreds of thousands of connected cars already won the data race?
Unfortunately, we don’t have a real palantir to see into the future. We can only make decisions based on what’s in front of us today, and the evidence is scant in the case of Wejo. If the SPAC merger does go through, Wejo will trade on the Nasdaq exchange under the ticker WEJO.
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