Why U Power Stock Is Highly Volatile This Week

What happened

U Power (UCAR 6.96%) stock has seen big swings following the announcement of a new partnership last Thursday. The Chinese electric vehicle (EV) components company's share price was down roughly 11% from the previous week's market close as of noon ET Thursday, according to data from S&P Global Market Intelligence.

U Power had its initial public offering (IPO) late in April and has seen highly volatile trading since its IPO. The company's share price soared 1,150% in its first day of trading, but it saw big sell-offs shortly after. Following an announcement of a new partnership with Japanese EV company Quantum Solutions at the beginning of this month, the company's share price had been rallying. But it has now seen a pullback.

So what

U Power announced on June 1 that it had entered into a partnership with Quantum Solutions to tackle new market opportunities. According to their agreement, U Power is set to provide Quantum solutions with battery-swapping services. In turn, Quantum Solutions will provide advisory services about Japan's EV market and how to pursue growth opportunities in the country.

Despite dipping in this week's trading, U Power stock is still up roughly 115% over the last month. On the other hand, the company's share price is still down approximately 81% from market close on the day of its IPO.

Now what

U Power stock seems likely to remain highly volatile in the near term. With the Chinese company having just recently gone public, there's not much visibility into its financial situation and near-term growth outlook. That sets the stage for speculative stock trading. 

While the partnership with Quantum Solutions has the potential to be a significant performance driver, it's not clear exactly how significant the recently announced deal will be in terms of actually generating sales or opening up new market opportunities. Investors without very high risk tolerance should be cautious about U Power stock right now. It is possible that U Power's share price will continue to rally, but there's currently a lot of guesswork involved when it comes to mapping out the business trajectory here.