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Why Chinese Stock Luokung Popped 34% This Morning

What happened

Chinese tech stock Luokung Technology (NASDAQ: LKCO) is sizzling today, trading up 17% as of 11:30 a.m. EDT after climbing as high as 34.3% in the morning thanks to a tie-up with tech giant Microsoft (NASDAQ: MSFT). This could be just the beginning of a long-term bull run for the small-cap stock.

So what

Luokung specializes in location-based services and digital mapping technology and has been vying for growth, especially in the autonomous driving space, ever since it bought eMapgo Technologies earlier this year. eMapgo provides car navigation, mapping, and advanced driver-assistance systems.

In its recently released report, IDC Consulting reported 70% growth in China's high-definition maps market in 2020, and named eMapgo as the third-largest mapping company in the nation with 16.15% market share, just behind Baidu and NavInfo.

Image source: Getty Images.

This morning, eMapgo announced a partnership with Microsoft to use each other's expertise to provide auto manufacturers with autonomous driving services, including data collection, storage, and simulation testing.

eMapgo revealed it has already won service contracts from a couple of car manufacturers, one each in Europe and the U.S., and will start servicing the contracts in the coming months.

Although today's press release didn't provide the details, eMapgo signed a contract earlier this month with Zenseact, a subsidiary of Volvo Cars focused on developing autonomous driving software for the Sweden-based automaker. Prior to that, eMapgo had signed contracts with Geely Automobile Holdings, China's largest automaker, which also owns Volvo Cars.

Now what

eMapgo and Microsoft have already been partners for years, but today's deal could mark the beginning of eMapgo's growth beyond China in the high-potential global autonomous vehicle market. Preliminary numbers suggest Luokung generated revenue worth $37.8 million in the first half of 2021, up from only $7.1 million in the year-ago period.

With the company also building smart systems for roads, like digital traffic management and weather perception, and evaluating acquisition opportunities in the autonomous vehicles space, Luokung stock could have a long runway ahead.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Baidu and Microsoft. The Motley Fool has a disclosure policy.


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