Cloud Stocks: Tuya Fails To Cope With Economic Turbulence

Photo Credit: Gerd Altmann from Pixabay

According to a recent report, the global internet of things (IoT) market is projected to grow 26% annually from $478.36 billion in 2022 to $2,465.26 billion by 2029. Despite the strong growth projections, China’s Tuya (NYSE: TUYA) is struggling to grow. It has found it difficult to deal with global inflation and supply chain issues, resulting in a significant erosion of its market capitalization since its listing last year.

Tuya’s Financials

For the second quarter, Tuya’s revenues fell 26% to $62.5 million mainly due to the decrease in IoT PaaS revenue. Net loss was $35.9 million, compared to $38.1 million reported a year ago. Non-GAAP net loss was $18.7 million, compared with $23.1 million last year.

IoT PaaS revenue fell by 38.1% to $47.6 million, primarily because of the global economic conditions. Tuya believes that its customers in North America and Europe have become more cautious in their purchases. The continuous high inflation has also aggravated the mismatch in supply and demand in consumer discretionary sector, causing heavy inventory backlog issues in the supply chain. SaaS and others revenue increased by 114.3% to $7.2 million mainly driven by an increase in new customers, expanded use cases, and an increase in revenues from the value-added services that are offered by Tuya. Smart device distribution revenues increased by 77.2% to $7.8 million.

For the first quarter of fiscal 2022, the company expects revenues of $50 million to $57 million. The market forecast revenues of $91.79 million for the quarter. The continuing net losses and the significant miss from the revenues forecast sent the stock tumbling.

Tuya’s Woes

Earlier in the year, Tuya had warned about the uncertainty of geopolitical conflicts and the high global inflation impacting its performance. It believes that the recovery in consumer electronics will take an extended period, thus causing continued slowdown in its performance. The downstream players in the IoT device industrial chain, including IoT device brands, OEMs and the distribution channels have faced inventory pressure from supply mismatches, which are also expected to take longer to fix. As a result, its IoT PaaS business continues to decline. Tuya expects 2022 to be a challenging year for the IoT consumer electronics industry, with headwinds coming on account of supply chain issues, logistics, and inflation. The increase in the transportation costs coupled with the unwillingness of companies to raise their selling prices in the retail channel has led to significant margin pressure.

Its SaaS and Smart cloud division offer a ray of hope. During the first half of this year, its commercial lighting and property SaaS doubled in the number of new brand owners acquired, new customer projects served, and a new device interfaced. The addition of the partners has helped drive revenues. With the continued global focus on the management of energy saving, it is adding focus on carbon accounting, theoretical energy consumption analysis, events hub, and other similar functions in its products and business development.

Meanwhile, it continues to see strong adoption in China. As of the second quarter, it had acquired several private cloud customers in China. It already has an IoT project with China Gas that is progressing as planned. Since its launch, it has achieved several milestones, such as completing the building of the Things Model for gas solution, rolling out a demo version, and introducing the development standards and instructions. Tuya sees significant business opportunities from its industrial customers in their pursuit of smart solutions. As a cloud-neutral product, it also has the advantage of addressing and optimizing the architectural adaptability for cross-cloud deployment and the standardization process.

Overall though, it has been a sorry year for Tuya so far. Its stock has taken a beating with the price falling significantly over the last year. Its stock is currently trading at $1 with a market capitalization of $586.4 million. It is a far cry from the $9.60 price that it was trading at a year ago. Last year, Tuya had raised $915.4 million through its listing at a valuation of $11.2 billion. The stock had fallen to a 52-week low of $0.86 earlier this month.

More By This Author:

Udemy Expands International Footprint
Coursera Continues To Stumble
Sumo Logic Focuses On Federal Offerings

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.