Morgan Stanley Initiates WeRide (WRD) with Overweight Rating, $23 Price Target

Morgan Stanley analyst Tim Hsiao has issued a **positive outlook** for WeRide Inc. (WRD), a leading developer of **Level 4+ (L4+) autonomous driving technology**. Hsiao initiated coverage of WeRide with an **Overweight rating** and a **price target of $23**, reflecting the firm’s belief in the company’s significant growth potential within the rapidly expanding autonomous driving market. This bullish assessment comes amidst projections of explosive growth in the global autonomous vehicle sector, particularly in China, positioning WeRide for substantial market share capture. The analyst’s report highlights WeRide’s innovative product portfolio, strategic collaborations, and ambitious commercialization plans as key drivers for its future success.

Key Takeaways: WeRide’s Autonomous Driving Ambitions

• Strong Buy Rating: Morgan Stanley initiates coverage of WeRide with an Overweight rating, signaling strong confidence in the company’s future performance.
• Significant Price Target: The $23 price target represents substantial upside potential from the current stock price, indicating a potentially lucrative investment opportunity.
• Booming Market: WeRide operates within the rapidly expanding global autonomous driving market, projected to reach trillions of dollars in value within the next decade.
• Innovative Technology: WeRide’s focus on L4+ autonomous driving positions it at the forefront of technological advancement in the sector.
• Global Expansion: WeRide’s operational presence spans 30 cities across seven countries, showcasing its ambitious global reach.
• Strategic Partnerships: Collaborations with industry giants, such as Uber, enhance WeRide’s market penetration and commercialization efforts.

WeRide: A Pioneer in Autonomous Driving

Founded in 2017, WeRide has quickly established itself as a prominent player in the autonomous driving space. The company’s dedication to **Level 4+ autonomous driving**, representing the highest level of automation short of fully autonomous capabilities, sets it apart. WeRide achieved a significant milestone in 2018 by launching **China’s first open-road testing program for L4+ vehicles**. This early adoption of advanced testing methodologies allowed WeRide to rapidly refine its technology and gain valuable real-world experience. Its commercial services, initially launched with robotaxis in 2019, have expanded to include robobuses (2020), robovans (2021), and even robosweepers (2022), demonstrating the versatility of its technology and a commitment to diverse applications.

Global Reach and Market Penetration

Currently operating in **30 cities across seven countries**, including the U.S., China, the UAE, and Singapore, WeRide exhibits a significant global footprint. Securing advanced test permits in these diverse markets underscores the company’s ability to navigate complex regulatory landscapes and establish itself as a key player on a global stage. This wide-ranging presence positions WeRide to tap into numerous markets experiencing rapid growth in the adoption of autonomous driving technologies.

Explosive Growth Potential in the Autonomous Driving Market

The market analysis supporting Morgan Stanley’s optimistic outlook is compelling. **CIC forecasts predict the global autonomous driving market will experience an 80% compound annual growth rate (CAGR) from $93 billion in 2025 to a staggering $1.745 trillion by 2030.** This explosive growth reflects the increasing demand for automated transportation solutions, enhanced safety features, and improved efficiency across various sectors. Within this expansive market, the penetration of L4+ AD technology is projected to surpass **25% by 2035**.

China: A Key Market for WeRide

The prospects within China are even more promising. The Chinese autonomous driving market is anticipated to expand at an **85% CAGR**, reaching **$639 billion by 2030**. This highlights the enormous growth potential for WeRide, given its origin and significant presence within the country. China’s robust technological advancements and supportive government policies create a fertile ground for autonomous driving innovation and commercialization, setting the stage for WeRide’s continued expansion within this vital market.

WeRide’s Strategy for Success

According to Hsiao’s report, WeRide’s **robust product pipeline and strategically formed partnerships are instrumental to its growth trajectory.** The company’s ambitious goal of achieving **large-scale commercialization of its robotaxi services by 2026** underscores its commitment to achieving market leadership. Collaborations, such as its partnership with Uber to deploy robotaxis in the UAE, are crucial in accelerating this commercialization process. These partnerships leverage the expertise and established market presence of major players, effectively expanding WeRide’s reach and bolstering its market credibility.

Valuation and Financial Projections

Morgan Stanley’s price target of $23 is derived from a **probability-weighted discounted cash flow (DCF) analysis**, incorporating a balanced perspective by assigning weightings of **25% to the bull case, 50% to the base case, and 25% to the bear case.** This methodology underscores a cautious yet optimistic assessment, acknowledging both the significant potential for growth and the inherent risks associated with the autonomous driving sector. The target price implies a **30x multiple on 2025 estimated price-to-sales**, suggesting a premium valuation reflecting WeRide’s strong growth potential and innovative technology.

Financial Projections:

Hsiao’s financial projections show **WeRide expecting to break even by 2027.** The analyst projected fiscal 2024 revenue of **645 million Chinese yuan** and an EPS loss of **(6.19) Chinese yuan**. These projections indicate that the company may indeed be several years off reaching profitability, but in the context of the fast-growing markets it is operating in, this is a reasonable picture of its progress towards significant financial success. For 2025, the revenue is estimated at **1.52 billion Chinese yuan** with an EPS loss of **(4.64) Chinese yuan**, and finally in 2026, the analyst predicts **4.62 billion Chinese yuan** in revenue and losses of **(2.59) Chinese yuan** for the EPS.

Conclusion: A Compelling Investment Opportunity

As **L4+ autonomous vehicle penetration increases globally**, WeRide is strategically positioned to capitalize on this burgeoning trend. Its innovative product offerings, strategic partnerships, and expanding global footprint all contribute to a compelling investment narrative. The projected large-scale commercialization of its services by 2026 further strengthens its long-term growth trajectory. While near-term earnings may demonstrate volatility, Morgan Stanley’s bullish outlook and substantial price target suggest a potentially lucrative investment opportunity for those willing to embrace the risks associated with investing in a rapidly evolving and high-growth sector. **WeRide’s innovative technology, ambitious goals, and robust market positioning make it a company worth watching closely.**

Price Action: At the time of writing, WRD stock was down 8.14% at $17.72.