Serve Robotics (SERV) Stock Continues Breakout on New Analyst Rating and Price Target

Nvidia-backed Serve Robotics saw its stock soar on Monday after receiving a new bullish analyst rating and price target in response to the rollout of its new third-generation autonomous delivery robots.

Ryan Troup October 28, 2024Last Updated: November 28, 2024

5 minutes read

A Serve Robotics delivery robot arrives at the front gates of a persons home. — Source: Serve Robotics

Shares of Serve Robotics (NASDAQ: SERV) stock jumped more than 20% on Monday following a fresh “Buy” rating and a $16 price target set by Ladenburg Thalmann analyst Glenn Mattson. The analyst praised the company for its forward-thinking approach in the rapidly evolving autonomous delivery sector, predicting robust growth and stronger market positioning for the firm as it rolls out a substantial new fleet of delivery robots. Ladenburg’s endorsement joins two other recent analyst ratings that cast the company in a highly favorable light, with Northland Securities issuing Serve Robotics an “Outperform” rating and a $16 price target and Seaport Global, which placed a “Buy” rating and $12 target price on SERV stock.

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Pivotal Partnership and Expansion Strategy

Serve Robotics, which went public earlier this year in a $40 million IPO, was spun out of Uber’s (NYSE: UBER) 2021 acquisition of Postmates and leverages a unique partnership with its former parent company. This arrangement enables Serve to access Uber Eats’ expansive data network, enhancing the efficiency and reach of its delivery services. Uber also actively directs order volumes to Serve’s robotic fleet, offering Serve a consistent stream of demand for its autonomous delivery devices.

Serve Robotics CEO, Dr. Ali Kashani, sees the expansion as transformative. Emphasizing how Serve Robotics’ technology has evolved to address crucial market challenges and underscoring the technical advances driving the company’s growth, Dr. Kashani stated:

“Producing a cutting-edge robot that can drive faster and further while running 5 times more AI and slashing costs by half is a true engineering feat. I am proud of what our team has accomplished with our third-generation robot, which represents the culmination of years of relentless effort. Our new robot puts Serve significantly down the cost curve and ahead of the competition as we roll out one of the largest autonomous fleets in the country in the coming months.”

This third-generation model includes Nvidia’s (NASDAQ: NVDA) advanced Jetson Orin AI module and upgraded REV7 digital lidar sensors from Ouster, which together significantly improve navigation, computing power, and delivery capacity.

Scaling the Robotic Fleet

The company’s planned deployment of 2,000 third-generation robots by 2025 has stirred up investor interest, with analysts predicting the fleet expansion could translate to revenue between $60 million and $80 million annually once it reaches full operational scale. Analysts, including Mattson, view Serve’s focus on reducing operational costs as another decisive factor likely to benefit long-term financial performance. Serve’s goal is to cut per-delivery costs to under $1 at scale, a move aimed at positioning the company as a leader in affordable, efficient delivery solutions.

According to Mattson, the $16 price target rests on Serve’s projected revenue multiple, estimating a valuation 15 times its anticipated 2026 earnings. With Serve’s current valuation rising following Ladenburg’s endorsement, the stock’s momentum reflects both investor enthusiasm for its growth trajectory and the potential financial upside of its extensive new robotic fleet.

Capital and Market Expansion Bolster Outlook

Beyond its partnership with Uber, Serve Robotics has actively sought out collaborations to expand both its technological capacity and market reach. In 2024, the company received a $20 million cash infusion via a private placement conducted by Aegis Capital Corp. This funding not only ensured Serve could maintain operations and continue R&D investments but also provided resources for the scaled deployment of its autonomous delivery units.

In addition to its existing partnerships with Uber Eats, 7-Eleven (OTC: SVNDY) and Shake Shack (NYSE: SHAK), Serve recently announced additional partnerships, including one with Alphabet’s (NASDAQ: GOOG, GOOGL) Wing Aviation, an autonomous drone service that could allow the company to offer integrated ground and air delivery options.

Such strategic moves align with Serve’s ambition to capture a larger portion of the delivery market, addressing both operational costs and customer needs for faster, more reliable deliveries. Serve is also planning to expand its presence outside of Los Angeles, with the company aiming to enter other US metro markets next year, focusing on areas with a high demand for last-mile delivery.

Highlighting the company’s confidence in the potential for these new markets, Euan Abraham, Serve Robotics Chief Hardware and Manufacturing Officer, described the company’s approach to scaling, stating:

“By utilizing a global supply chain and final assembly in North America, we have ensured exceptional quality and performance. Our rigorous engineering, validation, and testing processes have confirmed that this is the most rugged and high-performing robot we’ve ever created. Our cutting-edge robots will wheel into new cities and neighborhoods in 2025 and we can’t wait for users to experience their delivery capabilities first-hand.”

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Investor Sentiment and Future Potential

Serve Robotics’ upward momentum reflects a larger trend in the robotics sector, particularly in technologies aiming to reduce the last-mile delivery costs that burden many service providers today. With large players like Nvidia backing Serve Robotics through a recent investment, industry watchers have reason to believe the company’s market valuation may keep climbing, especially as operational challenges in the fast-growing delivery market persist.

However, the stock’s performance has not been without volatility. Following its initial public offering in April 2024, Serve’s shares fluctuated, even declining significantly before rallying once again. This volatility has created both risk and opportunity, a common theme for companies in high-growth sectors that require substantial upfront investment. Some analysts point to the high R&D costs—an expenditure that tripled in 2024—as a potential challenge, but others see it as a necessary step for Serve’s long-term growth.

For now, Serve Robotics appears well-positioned to expand its robotic delivery network and bring in steady revenues from its agreements with Uber and others, as well as from advertising displayed on its fleet. With its financial and operational trajectory closely watched by investors and industry analysts alike, Serve’s path forward will likely hinge on the successful deployment of its new robots and its ability to scale operations in a financially sustainable manner.

Outlook and Market Position

Serve’s strong analyst ratings underscore a broader recognition of the company’s capacity to become a significant player in the autonomous delivery market. As Ladenburg’s Mattson pointed out in his recent report, Serve has laid down a solid infrastructure and is positioned for notable expansion with the support of an impressive technology portfolio. This foundational strength, coupled with Serve’s anticipated gains in cost-efficiency, offers investors a compelling opportunity in the competitive delivery market.

Serve’s upcoming robot deployment not only has the potential to boost revenue but also to make Serve a familiar name in urban delivery solutions. As Serve brings its autonomous delivery technology to more city streets, it will face both competitive pressures and the logistical complexities of scaling its robotic network. But for now, analysts and investors appear bullish on its ability to drive growth, make inroads into new markets, and further solidify its position as a leader in autonomous delivery solutions.