Is Pony AI’s Recent 44% Surge Justified After New Robo-Taxi Expansion?

If you’ve been keeping an eye on Pony AI, you’re probably wondering whether its latest market run makes now a good time to buy, hold, or avoid the stock altogether. The past month has been a wild ride, with shares soaring 44.3% over the last 30 days and 24.6% of that gain coming just in the past week. Year to date, Pony AI has delivered a remarkable 40.5% return, and the buzz surrounding the company’s growth potential in autonomous mobility is only getting louder.

While these sharp moves are catching the market’s attention, they also raise the question of whether Pony AI is already priced for perfection or if more upside could be hidden beneath the surface. Investors are clearly reacting to signals of progress in robo-taxi technology and broader shifts in the self-driving tech sector, where risk perception can change quickly and sharply impact valuations.

But before you get swept up in the euphoria, let’s talk numbers. By scoring Pony AI across six established valuation checks, we see it clocks in at just a 1 out of 6, suggesting it is only undervalued by one metric. That’s not the kind of slam-dunk value buy that some might hope for, but raw scores can sometimes miss the bigger picture.

Let’s dig into how these valuation approaches stack up against Pony AI’s market price. Stay tuned, because later we’ll explore a perspective that could shed even more light on the company’s long-term worth.

Pony AI scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Pony AI Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting those back to today, capturing what those future dollars are worth now. This approach provides insight into whether a stock's current market price reflects its expected cash generation over time.

For Pony AI, the latest twelve months of free cash flow stand at $-140 million. Looking ahead, analysts anticipate sharp growth, with projections reaching $214 million by 2029. Notably, estimates for cash flows beyond five years rely on extrapolations, as direct forecasts are unavailable. These future free cash flows increase substantially between 2029 and 2035, reaching as high as $1.03 billion in 2035 according to extended projections.

Based on the 2 Stage Free Cash Flow to Equity model, Pony AI's intrinsic value is estimated at $25.32 per share. This value is 15.7% above the current market price, indicating the stock is modestly undervalued from a pure cash flow perspective.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Pony AI.

Our Discounted Cash Flow (DCF) analysis suggests Pony AI is undervalued by 15.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Pony AI Price vs Book

The price-to-book (P/B) ratio is often a go-to valuation metric for companies in the technology and software sector, especially when profits are not yet consistently positive. Since it compares the market value of a company to its net asset value, P/B can provide a grounded perspective on how much investors are paying relative to Pony AI’s underlying assets. This makes P/B particularly relevant for high-growth businesses like Pony AI, where earnings are more volatile but the asset base is still significant.

Growth expectations and perceived risks play a big role in where a “normal” or “fair” P/B ratio settles. Companies with stronger growth potential and lower risks can command higher P/B multiples, reflecting investor optimism about future value creation beyond what’s on the balance sheet.

Pony AI currently trades at a P/B ratio of 8.88x, which is significantly higher than both its peer average of 7.39x and the software industry average of 3.97x. Typically, investors might be cautious about such a premium, but that is where Simply Wall St’s “Fair Ratio” comes in. This proprietary measure adjusts for factors like Pony AI’s earnings growth, risk profile, profit margins, industry norms, and company size, so it offers a fuller view than simple peer or sector comparisons.

By weighing in these company-specific variables, the Fair Ratio tells us what multiple Pony AI deserves in today's market, rather than just what is typical. In this case, Pony AI’s P/B of 8.88x is modestly above its Fair Ratio, but the difference is not large enough to ring alarm bells.

Result: ABOUT RIGHT

PB ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Pony AI Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, intuitive way to express your story about a company, connecting your view of its business prospects with concrete financial forecasts and an estimated fair value. Instead of just crunching numbers, a Narrative lets you link what you believe about a company's future growth, profitability, and risks to a financial outcome. This approach ties together facts, forecasts, and valuation in a compelling way.

Narratives are available directly on the Simply Wall St Community page, making them an accessible and dynamic tool used by millions of investors. They help you decide when to buy or sell by comparing your Fair Value against the current price and update automatically whenever key news or earnings come in. For Pony AI, one investor might see explosive growth on the horizon and set a high fair value, while another could be more cautious and arrive at a much lower fair value based on conservatism. Narratives enable you to personalize what's behind the numbers and make better, more confident investment choices.

Do you think there's more to the story for Pony AI? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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