Cantor Fitzgerald analyst Andres Sheppard initiated coverage on Aurora Innovation Inc (NASDAQ:AUR) with an Overweight rating and a price forecast of $10.

Aurora is developing autonomous self-driving software, hardware, and data services as a platform to enable faster, safer, and more efficient long-haul trucking.

Sheppard noted Aurora benefits from a clear path towards commercialization, an asset-light and high-margin business model, and favorable regulation.

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Aurora is developing self-driving technology that combines cameras, radars, and proprietary long-range LiDARs. The company plans to commercialize its Level 4 autonomous technology (named Aurora Driver) primarily in trucking via high-volume and highway-focused routes. Through October 2024, Aurora Driver has accounted for over 2 million miles driven (with supervision) and over 8,200 commercial loads delivered.

Aurora plans to launch commercial operations in mid-2025 with up to 10 driverless trucks and then scale to "tens of trucks" by the end of 2025.

Sheppard noted that Aurora benefits from an asset-light and high-margin business model, which he expects will allow the company to scale quickly once it ramps up.

Aurora has an exclusive partnership with Continental, designed to help scale up Aurora Driver's hardware for high-volume installation.

Both teams are preparing to start initial testing in the first half of 2025, with SOP targeted for 2027, and expect this will be a material catalyst. Starting in 2027 and through 2031, Sheppard projects the company's annual capex will be lower than $30 million, with gross margins starting at ~24% and increasing to over 50%.

While President-elect Trump plans to potentially develop a federal framework for self-driving vehicles in the United States, Aurora already benefits from a favorable regulatory environment.

In the U.S., over 20 states expressly allow the driverless deployment of autonomous trucks, including Texas, Aurora's initial target market.

In Texas, over 70% of all goods are moved by trucks and truck drivers are limited to 11 hours of service, while Aurora Driver can operate for 20 hours uninterrupted.

Aurora estimates that the TAM for trucking is ~$1 trillion in the U.S. and ~$4 trillion globally. Sheppard noted Aurora could capture a significant market share with an increasing truck driver shortage.

Price Action: AUR stock is down 1.51% at $7.51 at the last check on Tuesday.

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Photo courtesy: Aurora Innovation