Cheetah Net's Logistics Leap: A High-Stakes Transformation (NASDAQ:CTNT) - CTNT Stock Research Report

## Executive Summary / Key Takeaways * Cheetah Net Supply Chain Service Inc. (CTNT) has undergone a profound strategic pivot, divesting its declining parallel-import vehicle business to focus entirely on logistics and warehousing services. This transformation is the core of its current investment thesis. * The new logistics segment, bolstered by recent acquisitions, has delivered substantial revenue growth in the first half of 2025, yet it continues to incur net losses as the company invests in scaling its new operations. * CTNT's liquidity is supported by prior public offerings, with management expecting to fund operations for the next 12 months, though a "going concern" warning highlights the execution risk of achieving sustained profitability. * The company operates in a competitive logistics landscape, where its cross-border expertise and global network are key strengths, but it faces vulnerabilities from geopolitical trade tensions and the need to rapidly scale its digital presence and customer base. * Future success hinges on CTNT's ability to enhance operational efficiencies, expand its market footprint in California, and effectively manage the ongoing U.S.-PRC trade dynamics that directly impact its freight forwarding services. ## A Strategic Pivot: From Vehicles to Vital Logistics Cheetah Net Supply Chain Service Inc. (CTNT) stands at a pivotal juncture, having executed a dramatic strategic transformation that redefines its very essence. Historically, the company carved out a niche in the parallel-import vehicle dealership business, primarily sourcing vehicles from the U.S. for sale in the PRC market. This segment experienced robust growth between 2016 and the first half of 2022. However, a confluence of adverse market forces, including the COVID-19 pandemic, weakening macroeconomic conditions, intense price competition from luxury automakers, and a pronounced shift towards domestic electric vehicles in the PRC, led to a precipitous decline. Vehicle sales plummeted by 95.7% in 2024, with revenue shrinking from $38.3 million in 2023 to just $1.6 million. Recognizing this unsustainable trajectory, CTNT's Board formally approved the discontinuation of its parallel-import vehicle business on March 3, 2025, marking a decisive break from its past. This strategic pivot has seen CTNT fully embrace the logistics and warehousing sector. The company initiated this shift in early 2024 with the acquisition of Edward Transit Express Group Inc., a licensed Non-Vessel Operating Common Carrier offering freight forwarding and warehousing services. This was followed by the acquisition of TW EW Services Inc. in December 2024, adding general labor support and logistics coordination capabilities. To further solidify its new direction, CTNT relocated its headquarters to Irvine, California, in July 2024, strategically positioning itself to leverage the vital ports of Los Angeles and Long Beach. This move underscores a commitment to serving international trade, particularly between the U.S. and the PRC, while also expanding its domestic U.S. market presence. ## The Technological Edge in a Competitive Arena In the modern logistics landscape, technological prowess is increasingly a differentiator. As part of its strategic acquisitions, CTNT acquired "developed technology" through Edward, an intangible asset valued at $120,000. While specific details regarding the nature of this technology, its quantifiable benefits, or ongoing R&D initiatives are not publicly detailed, its inclusion as an acquired asset suggests a strategic intent to leverage technological solutions for operational efficiency and optimization within its logistics and warehousing services. In an industry where speed, reliability, and cost-effectiveness are paramount, technological enhancements can be foundational to improving service quality, streamlining supply chains, and ultimately bolstering competitive advantage. The strategic importance of such assets lies in their potential to reduce operational costs, enhance service delivery, and support scalability, thereby contributing to CTNT's long-term growth strategy and market positioning. The logistics and warehousing industry is characterized by intense competition, where success hinges on service quality, speed, reliability, and pricing. CTNT's competitive standing is shaped by its unique strengths and vulnerabilities. Its global network and cross-border supply chain expertise, particularly in the U.S.-PRC trade lanes, represent a significant advantage. This specialization allows CTNT to offer tailored solutions for international trading companies, potentially providing a niche that larger, more generalized logistics providers might not fully address. However, CTNT faces formidable challenges. Compared to digitally advanced competitors like Carvana (TICKER:CVNA), which excels in tech-driven, seamless online transactions, CTNT's digital presence and innovation speed may lag. While Carvana operates in auto retail, its emphasis on digital efficiency sets a high bar for any modern service provider. Similarly, against established giants in the broader automotive and logistics sectors, such as AutoNation (TICKER:AN) and Group 1 Automotive (TICKER:GPI), CTNT's operational scale and market positioning are still developing. These larger players benefit from extensive networks, diverse revenue streams, and robust customer loyalty. CTNT's dependence on international trade, particularly between the U.S. and the PRC, also exposes it to geopolitical risks and tariff policies, as evidenced by recent disruptions to its ocean freight activities. To thrive, CTNT must rapidly develop and scale an effective salesforce and continue to invest in technology that enhances its operational execution and expands its customer base, thereby strengthening its competitive moat. ## Financial Performance: A Business in Flux CTNT's recent financial performance reflects a company in the midst of a significant, costly transformation. For the three months ended June 30, 2025, revenue from continuing operations (logistics and warehousing) surged to $354,126, a remarkable 278.5% increase from $93,563 in the same period of 2024. This growth was overwhelmingly driven by the acquisition of TWEW in December 2024, which contributed $301,442, or 85.1%, of the total revenue. Edward, the earlier logistics acquisition, saw its revenue decrease by 43.7% to $52,684, primarily due to a temporary suspension in U.S.-PRC ocean freight activities in April 2025 following U.S. government tariff threats. Trade flows stabilized in May and June after negotiations resumed, illustrating the direct impact of geopolitical dynamics on CTNT's core business. For the six months ended June 30, 2025, total revenue from continuing operations reached $833,925, a 389.4% increase from $170,397 in the prior year period, again largely due to TWEW's contribution of $718,726. Despite this top-line growth, the cost of revenues also increased substantially by 600.1% for the quarter and 743.1% for the six-month period, reflecting the operational costs associated with the newly acquired businesses. This led to a gross profit decline for the quarter to $34,900 from $47,965, though the six-month gross profit saw a modest 10.8% increase to $91,156.

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Operating expenses remain a significant drag on profitability. General and administrative expenses for continuing operations decreased by 6.9% for the quarter, primarily due to lower legal, accounting, and recruiting fees as the company streamlined post-acquisition. However, for the six-month period, these expenses increased by 10.6% to $1.81 million, driven by higher rental and lease costs (following the Irvine HQ relocation and Edward acquisition), increased personnel expenses for the new segment, and higher depreciation and amortization from new assets. Share-based compensation expenses also emerged in 2025, totaling $10,444 for the quarter and $26,629 for the six months. A notable positive financial development is the substantial increase in interest income. For the six months ended June 30, 2025, interest income surged by 740.1% to $480,318, primarily from short-term loan receivables and certificates of deposit funded by the net proceeds from public offerings in May and July 2024. Despite this, CTNT reported a net loss from continuing operations of $512,528 for the quarter and $1.27 million for the six months, indicating that the new logistics segment is still in its investment and scaling phase. The discontinued parallel-import vehicle operations, while generating a net loss of $205,440 in the first half of 2024, provided $2.54 million in cash from operating activities in the first half of 2025, primarily from the collection of outstanding receivables, which temporarily bolstered overall cash flow.

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## Liquidity and Outlook: A Path Forward with Challenges As of June 30, 2025, CTNT held $0.2 million in cash and cash equivalents, with total current assets of $9.9 million, including $8.7 million in loan receivables. Current liabilities stood at $0.9 million, resulting in a working capital balance of $8.9 million.

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While management believes it can fund current operations for at least the next 12 months from existing cash and capital infusion proceeds, the net operating loss and negative cash flow from continuing operations for the six months ended June 30, 2025, "may raise doubts about the Company's ability to continue as a going concern." This highlights the critical need for the new logistics business to achieve profitability. The strategic deployment of public offering proceeds into short-term loan arrangements, generating significant interest income, demonstrates a proactive approach to optimizing cash utilization and preserving capital flexibility. Management expects the remaining interest on a $1.0 million loan to Hongkong Sanyou Petroleum Co Limited to be fully repaid by mid-August 2025, and the principal of a $1.5 million loan to the same entity, with relevant interests, by the end of August 2025. These repayments will provide short-term liquidity boosts.

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Looking ahead, CTNT's outlook is firmly centered on the successful execution and expansion of its logistics and warehousing services. Management is committed to improving operational efficiencies and expanding the market presence of Edward and TWEW in the California area. However, the company explicitly acknowledges that the business shift "may take longer time than expected to generate ideal profits," depending on the business environment, operational management, and market expansion efforts. The ongoing U.S.-PRC trade tensions remain a significant risk, capable of reducing market demand for freight and warehousing services and negatively impacting growth prospects. Furthermore, the logistics business's high dependence on a limited number of customers and third-party providers introduces concentration risk. ## Conclusion Cheetah Net Supply Chain Service Inc. is in the midst of a profound and necessary transformation, shedding its legacy parallel-import vehicle business to build a new future in logistics and warehousing. This strategic pivot, driven by recent acquisitions and a focus on cross-border trade, has generated impressive top-line growth in its new segment. However, the company faces the dual challenge of achieving sustained profitability in a highly competitive market while navigating significant geopolitical and operational risks. For investors, CTNT represents a high-stakes opportunity. The company's ability to leverage its global network and supply chain expertise, coupled with its strategic positioning in California's key port regions, could unlock long-term value. Yet, the "going concern" warning, the ongoing net losses from continuing operations, and the explicit risks associated with trade tensions and customer concentration demand close scrutiny. The investment thesis hinges on management's disciplined execution of its expansion strategy, its ability to rapidly scale operational efficiencies, and its success in converting revenue growth into sustainable profitability in the dynamic logistics sector.