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Why Otonomo Technologies Stock Was Up as Much as 23% This Morning

By Nicholas Rossolillo – Oct 4, 2021 at 3:07PM

Key Points

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This small connected vehicle technologist benefited from an optimistic analyst note.

What happened

Shares of Israeli connected vehicle tech upstart Otonomo Technologies (OTMO -2.05%) jumped as much as 23% higher this morning -- although the price has since moderated. Shares were up just 1.6% as of 2:50 p.m. EDT. 

The stock got its brief boost after analyst Jack Andrews of Needham & Company initiated coverage of the company with a buy rating and price target of $10. That's double the current price of just under $5 per share as of this writing.

So what

A little context will help with the current action in this connected vehicle stock. The company completed its initial public offering (via special purpose acquisition company merger) in mid-August, and the stock's value has been halved since then. This isn't unusual behavior for SPAC stocks following their go-public proceedings. Otonomo, like many other companies that have gone the IPO route this way, generates very little actual revenue right now. This is a long-term development company, and the stock's progress will be dependent on the business's ability to find paying customers over time.

A driver in a car taking the keys from someone else.

Image source: Getty Images.

Now what

Otonomo is an interesting proposition, though. The company's Vehicle Data Platform is powered with agreements with 19 vehicle and parts manufacturers, fleets, and other data providers and is designed to license the information collected from connected vehicles. As more new cars and trucks get hooked up to a network, new use cases for the data could be unlocked by insurance companies, fleet services, logistics companies, and city planners.

Of course, data privacy could become a top headwind to Otonomo's development, but its treasure trove of transportation metrics could be promising. Until actual revenue starts rolling in, this is a speculative bet -- although the estimated $240 million in cash and equivalents on balance after the SPAC merger could go a long way toward making this a viable business one day.

Nicholas Rossolillo and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Otonomo Technologies Ltd. Stock Quote
Otonomo Technologies Ltd.
$0.41 (-2.05%) $0.01

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