Embark Technology eyes road to recovery in under-addressed opportunities (NASDAQ:EMBK)

It’s been an inauspicious life as a publicly traded company for Embark Technology (NASDAQ:EMBK) since going public in 2021.

Shares of the autonomous driving technology company have fallen over 80% since listing on the NASDAQ, with marked declines coming in recent months as much of high-flying tech has sold off. However, according to CEO Alex Rodrigues, the short term turmoil is merely an entrée to the longer term opportunity in autonomous trucking.

The young, Canadian-born CEO pointed to under-addressed niche opportunities in autonomous trucking and the company’s recent testing of its technology in snowy weather. He noted in an interview with SeekingAlpha that when the company started in 2016, the industry’s focus for autonomous vehicles was almost entirely upon cars rather than trucks, offering an opening in the market for his firm to fill.

“What we realized is that trucks were not being talked about when we started,” Rodrigues said, driving home the company’s longer term experience despite its youth on public markets. “We believed that trucking was the best use case for self-driving technology and it is only now that many others are realizing this fact.”

In another pursuit of under-recognized opportunity, the company is pioneering autonomous driving through snowy terrain. Apropos of his Canadian upbringing, Rodrigues’ company is also honing its focus on colder climates while many peers focus solely on areas like Arizona and southern California by contrast.

“Successful snow testing creates a path to unlocking Northern lanes on which roughly one of five runs experience some snowy conditions,” he detailed in the company’s latest earnings call. “The inclusion of the northern lanes will more than triple our serviceable market, and we have to be ready to navigate snowy conditions there.”

Still, Embark plans to deploy its technology within the US Sunbelt first, before expanding northward to the entire lower 48 where performance in snow-covered roads is prized.

Finally, Rodrigues addressed concerns that strides in autonomous trucking are exacerbating trucker shortages that are adding to supply chain disruptions across the economy. He explained that the strides made in autonomous are neither going to completely eliminate supply chain problems nor demand for truckers.

“Our software is not a singular panacea to trucker shortages nor is Embark looking to replace truckers,” Rodrigues told SeekingAlpha. “There are actually a number of studies – from organizations like the US Department of Transportation and the Silicon Valley Leadership Group – that show autonomous trucking can help truckers and improve their quality of life while increasing efficiency.”

For example, the ability of autonomous vehicles to function without breaks allows for them to operate long haul trips on highways with drivers acting as partners in city environments. Rodrigues suggested this dynamic could help alleviate a number of supply chain issues confronting numerous industries at present while preserving jobs in the industry.

He added that the company’s asset-light, software focused approach separates it from the hordes of competitors vying for supremacy in the autonomous space. Further, it aids in preserving capital and providing flexibility in the business model to easily adapt to market conditions.

Rodrigues pointed to major partners like Ryder (R -1.1%), US Xpress (USX -5.9%), and Alterra Property as evidence that its technology is generating buy-in from major players with expertise in the trucking and logistics industries.

In terms of recent performance, Rodrigues noted that the market is being understandably unkind to growth companies still ramping toward longer term targets in the current environment and is hyper-focused on profits in the near term. However, he voiced continued confidence in the road ahead.

The company clarified further that the latest slide for the stock had little to do with the reported operating results to date. Instead, Embark saw a big spike in volume immediately following the expiry of the company’s lockup on May 9. The day after lockup, Embark traded 23.2M shares in one day, compared to an average trading volume of under 1M up to that point.

Interestingly, major shareholders, such as Sequoia Capital and DCVC were not among the bulk sellers. The company instead pointed to Tiger Global Management, which held approximately 21M Embark shares before the lockup expired, as a more likely culprit. This theory was all but confirmed in Embark’s most recent beneficial ownership table filed on Wednesday. In it, Tiger Global is no longer listed as a 5% holder, while DCVC, Sequoia, and Rodrigues remained at their previous ownership levels.

The company added that the recovery in the ensuing days following the earnings result, which came after the market close on May 10, reflected the positive reaction to the progress being made towards achieving Embark’s milestones.

Still, the autonomous driving space and, increasingly, autonomous freight, is a heavily populated space and each company competing to be the dominant player in the arena is vying to prove itself. In the end, each is therefore a “show-me” story with more skeptical investors still sitting on the sidelines.

This skepticism is especially pointed for Embark, which finds itself competing with Wall Street darlings like Alphabet, Apple, Tesla, and more racing to perfect the promising technology. With only $245M in cash on the books, battling those deep-pocketed peers is no small task. In truth, at current cash burn trends, the company could well run out of cash in a matter of a few years.

Nonetheless, Rodrigues, for his part, is exceptionally confident that continued focus on trucking, inroads to key partners, and an asset-light business model will carry the company toward an inflection point in coming years.