Jefferies raises Tuya stock price target to $3.60 on AIoT growth potential

Jefferies raised its price target on Tuya Inc (NYSE:TUYA) to $3.60 from $3.49, maintaining a Buy rating, following the company's Q2 2025 results which saw 9% revenue growth and a 302% net profit increase. The firm cited strong operational leverage, robust financial health with minimal debt, and Tuya's strategic positioning to benefit from increasing AIoT adoption, noting 93% of its device categories incorporate AI. Jefferies views the valuation as attractive and believes tariff headwinds are largely priced in, supporting the stock's 49.76% year-to-date return.

Analysis

Jefferies has reiterated its Buy rating on Tuya Inc. (TUYA) and increased its price target to $3.60, underpinned by a strong financial performance and strategic positioning in the AIoT sector. The company's stock has already demonstrated significant momentum with a 49.76% year-to-date return. This positive outlook is supported by Tuya's second-quarter results, which featured a 9% rise in revenue to $80.1 million, slightly ahead of forecasts, and a notable 302% increase in net profit, driven by stable gross margins and strong operational leverage. The company's balance sheet appears robust, evidenced by a high current ratio of 7.25 and a near-zero debt level. While U.S. tariffs have caused a slowdown in the IoT PaaS and Smart solution segments, the SaaS business has shown resilience, and Jefferies' view is that these tariff-related headwinds are largely priced into the current valuation. Looking forward, Tuya is well-positioned to capitalize on AIoT adoption, with 93% of its device categories already incorporating AI functions. The valuation is considered attractive by Jefferies, citing a 14x 2026 estimated ex-cash P/E, a 1.1x PEG ratio, and an approximate 4% dividend yield.

Key Decisions for Investors

• Investors with a bullish outlook on the AIoT sector may find Tuya's attractive valuation and strong profit growth compelling, especially given the analyst's view that tariff risks are already priced in.
• It is critical to monitor the performance of Tuya's IoT PaaS and Smart solution segments for any further impact from U.S. tariffs, as this remains the primary headwind to its growth profile.
• The resilience of the SaaS business and the company's progress in AI-enabled device adoption are key forward-looking indicators that should be watched closely to validate the long-term growth thesis.