Serve Robotics SERV shares have surged 9.9% in the past week, outperforming the Zacks Computer & Technology sector’s gain of 2.3% and the Zacks IT Services industry’s return of 2%.

Shares of this AI-powered last-mile robot delivery service provider saw significant volatility since its public equity offering on April 18, from when it started trading on the Nasdaq Capital Market under the ticker “SERV.” Since then, SERV shares have jumped 153.2%.

SERV’s long-term prospects ride on growing demand for last-mile delivery of food and other items on partner platforms that include Uber Eats and 7-Eleven. The company, which was spun off from Uber Technologies UBER in 2021, counts NVIDIA NVDA, Uber, 7-Ventures and Delivery Hero’s corporate venture units as its strategic investors.

The surge in SERV shares brings a couple of questions into investors’ minds - is this momentum going to last for SERV, and whether this is the right time to jump into the stock?

SERV Shares Beat Sector Past Week

Image Source: Zacks Investment Research

Let’s dig deep to find out.

Strong Last-Mile Delivery Prospects Aids SERV

SERV reported revenues of $0.47 million, significantly better than the $0.06 million reported in the year-ago quarter. It saw an 80% jump in second-quarter delivery and branding revenues. Daily Supply Hours surged 28% sequentially.

SERV’s expanding robotics offering is expected to improve its competitive position in the last-mile delivery space currently dominated by the likes of DoorDash and Amazon. 

Serve Robotics’ expanding partner base that includes Shake Shack SHAK, Ouster and Magna are noteworthy. In June 2024, SERV announced the expansion of its delivery operations into Koreatown and began onboarding new local merchants through its partnership with Uber Eats. Its latest partnership with SHAK expands SERV’s footprint in Los Angeles. 

Magna has become a contract manufacturer for SERV’s technology, and the first robots are expected to roll off the production line by the end of the fourth quarter of 2024.

Serve Robotics believes robots have the potential to reduce the average delivery cost to under $1, lower than the delivery cost by human couriers currently, making on-demand delivery more affordable and accessible in the areas in which it operates. 

Per the ARK Invest report, the potential market for food and parcel delivery by robots and drones is expected to hit $450 billion globally in 2030.

Serve Robotics expects to deploy 250 robots by the end of the first quarter of 2025 in Los Angeles. Other cities that include its expansion plan are San Diego, Dallas and Vancouver.

Strong Liquidity to Boost SERV’s Prospects

SERV’s strong liquidity position is expected to help it execute its long-term strategic plan that includes the deployment of 2000 robots across the United States in 2025. It has already completed the design phase for the third-generation robot.

Serve Robotics generated $35.8 million in gross proceeds from the successful public equity offering and $15 million from a private placement. 

As of June 30, 2024, SERV had cash and cash equivalents of $28.8 million. Most recently, it raised another $20 million.

Is SERV Stock a Buy?

Technical indicator is bearish for SERV as the shares are trading below the 50-day moving average.

SERV Trades Below 50-Day SMA

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for SERV’s 2024 loss has shown improvement as the figure is now expected to be a loss of 85 cents, a penny narrower over the past 60 days. 
 

Moreover, SERV stock is overvalued at this current moment, as suggested by the Value Score of F.

SERV’s revenue decline on a sequential basis in the second quarter of 2024 has been a concern. It suffers from customer concentration, with one customer accounting for 74% of accounts receivable as of June 30, 2024.

Nevertheless, SERV’s expanding robotics fleet bodes well for long-term investors. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term. 

Serve Robotics currently has a Zacks Rank #2 (Buy), suggesting that it may be wise to enter the stock at this moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Serve Robotics Inc. (SERV) : Free Stock Analysis Report

Shake Shack, Inc. (SHAK) : Free Stock Analysis Report

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research