Why Pony AI Stock Is Flying High This Week

Pony AI (NASDAQ: PONY) stock has been on quite a run, having soared by about 160% in just the last month. Much of that gain came this week. Shares of the China-based autonomous mobility company were higher by 63.1% as of early Friday, according to data provided by S&P Global Market Intelligence.

The stock's momentum wasn't due to any tailwinds from the Nasdaq Composite, which was about flat for the week at that same time. Rather, it came from a major partnership the company announced on Tuesday -- its second in the past two weeks.

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Partnering with Uber is a game changer

The big news this week was a new partnership with Uber Technologies. Pony AI already operates autonomous ride-hailing services. Now Uber, the ride-sharing global leader, will deploy Pony AI's driverless taxis on the Uber platform. The partnership will begin with a launch in what it calls a "key" Middle East market later this year.

That comes on the heels of a prior deal struck with Tencent's cloud and mapping businesses. Pony AI's autonomous driving technology and robotaxi services will be integrated into Tencent's mobility platform and its digital mapping tool. Access to Tencent's ecosystem should help Pony AI grow meaningfully in the Chinese market.

Pony AI is overvalued

Those partnerships are positive developments for Pony AI, but investors look to have gotten the stock ahead of itself. The company generated just $75 million in revenue in 2024. With its $6 billion market cap, it is now trading at a price-to-sales (P/S) ratio of 80 based on 2024 sales.

The stock is overvalued, and will likely come down from its current lofty level. Shareholders would probably be wise to take advantage of the recent surge and sell existing shares. Pony AI will report its first-quarter results on May 20. It would have to give extremely strong guidance for the stock to maintain its recent level.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tencent and Uber Technologies. The Motley Fool has a disclosure policy.