Is Full Truck Alliance Headed for a Breakdown?

Full Truck Alliance Co Ltd (YMM), through its subsidiaries, provides comprehensive services for shippers and truckers through its mobile and website platforms in China. The group derives its revenues principally from shippers' and truckers' use of its platforms in connection with freight matching services and value-added services.

The company is currently undergoing a cybersecurity review of its Yunmanman and Huochebang apps. In the latest quarter, YMM saw a significant increase in the number of fulfilled orders, up to 78.4% year over year. Going forward, the company is looking to sharpen its technological edge and broaden its logistics network.

The firm’s balance sheet looks solid as its current assets of $4.6 billion are much higher than its current liabilities. In the third quarter, revenue jumped 68.9% year over year to $192.7 million. Next year, sales are expected to rise 84.3%, while earnings are forecasted to surge 1,150%.

However, the stock looks overvalued with a price to sales of 27.3, well above the industry average of 10.9. Its price to cash flow is also very high. YMM has shown mixed performance since the end of August, as shown in the chart below.

Take a look at the 1-year chart of YMM below with added notations:

Chart of YMM provided by TradingView

YMM has formed an important level of support at around $14 (blue) over the past several months. The stock has repeatedly rallied off that mark, but now it has fallen back down to that level again. If YMM were to break support, lower prices will likely follow from there.

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Therefore, if the stock were to break below the support, a short position could be entered with a protective stop placed above the entry point.

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YMM shares were trading at $13.61 per share on Monday morning, down $0.41 (-2.92%). Year-to-date, YMM has declined -36.70%, versus a 27.38% rise in the benchmark S&P 500 index during the same period.

I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.

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