Mobileye (MBLY -4.93%) went public again in October 2022, more than five years after it was acquired by Intel for $15 billion. The automotive chipmaker listed its shares at $21, and they closed at a record high of $47.02 on Feb. 15, 2023. Mobileye's stock now trades at about $32.
Therefore, a $2,000 investment would have grown to nearly $4,500 before shrinking to about $3,000 today. Let's see why Mobileye's stock rallied and pulled back and where it might be headed over the next decade.
Image source: Getty Images.
What does Mobileye do?
Mobileye, which is based in Israel, controls nearly 70% of the advanced driver assistance system (ADAS) market. Its systems use cameras, sensors, and its own EyeQ computer vision chips to help drivers park their vehicles, cruise in single lanes, and access other semi-autonomous features. The newest "SuperVision" version of that platform supports hands-free navigation capabilities and aims to bridge the technological gap between semi-autonomous and fully autonomous vehicles.
Mobileye outsources the production of its EyeQ chips to STMicroelectronics, and that partnership notably didn't change even after it was acquired by Intel. Intel retained an 88% stake in Mobileye after its initial public offering (IPO).
How fast is Mobileye growing?
Mobileye's revenue and earnings growth has been a bit lumpy over the past four years.
|
Metric |
2020 |
2021 |
2022 |
2023 |
|---|---|---|---|---|
|
Revenue growth |
10% |
43% |
35% |
11% |
|
Adjusted net income growth |
467% |
64% |
28% |
9% |
Data source: Mobileye.
In 2020, its growth cooled off as the COVID-19 pandemic disrupted the auto sector. Then, in 2021, its growth accelerated again as most of those headwinds dissipated.
In 2022, it continued growing, even as STMicro's supply chain constraints curbed its production of new EyeQ chips. But in 2023, its growth decelerated as it grappled with inflation, rising rates, automaker strikes, and slower electric vehicle (EV) sales in China.
For 2024, it expects its revenue to drop 6%-12% as it slogs through an excess inventory of EyeQ chips. Many automakers stocked up on too many EyeQ chips in response to the supply chain challenges in 2021 and 2022. They're now sitting on millions of chips that still need to be installed in new vehicles.
That glut will likely offset any of the macro improvements across the auto sector. It expects its adjusted operating margin to drop from 33% in 2023 to a midpoint of 17% in 2024.
Analysts expect Mobileye's revenue and adjusted earnings per share (EPS) to decline 8% and 52%, respectively, in 2024. That might seem like a dim outlook for a stock trading at 83 times forward earnings, but analysts expect its revenue to rise 39% in 2025 as its adjusted EPS doubles. We should take those estimates with a grain of salt, but they suggest that Mobileye will gradually overcome its supply glut and macro challenges over the next few quarters.
Where will its stock head over the next decade?
Mobileye still leads the ADAS market, but it faces stiff competition from other automotive chipmakers, like Ambarella, Qualcomm, and Nvidia. Automakers like Tesla are also producing their own custom chips and ADAS platforms.
If Mobileye can stay ahead of those competitors, it will likely benefit from the secular expansion of the ADAS and driverless vehicle markets. According to Future Markets Insights, the ADAS market could grow at a 12.7% compound annual growth rate (CAGR) from 2024 to 2034. If Mobileye merely keeps pace with that market, its annual revenue could rise from $1.9 billion this year to $6.3 billion in 2034.
And if Mobileye hits that target, its stock could more than triple over the next decade as the ADAS market expands. However, investors should expect a bumpy ride as its shipments ebb and flow with the cyclical automotive and semiconductor markets.
