The explosion in artificial intelligence (AI) technology last year brought the possibility of fully self-driving vehicles closer to reality. One of the companies working to bring autonomous cars to the masses is Mobileye Global (MBLY +0.82%).
Founded in 1999, the company possesses decades of experience with advanced driver assistance systems (ADAS), technology that helps drivers avoid accidents. It has built an impressive business selling its technology to over 50 vehicle manufacturers around the globe, including Volkswagen.
But the potential of autonomous driving and the advent of AI doesn't necessarily mean Mobileye stock is a buy. Let's delve deeper.
NASDAQ: MBLY
Key Data Points
Mobileye's technology
According to consulting firm McKinsey, the combined ADAS and autonomous driving market could be worth over $300 billion by 2035. At least $170 billion of that would come from autonomous driving.
Mobileye has built a complex platform that analyzes driving conditions in real time, consumes minimal vehicle power, and is cost-effective for automakers. The firm's solutions have been used in more than 170 million vehicles, and have provided Mobileye with vast quantities of driving data to continue evolving its systems.
The company anticipates that the path to fully autonomous vehicles will be a gradual transition. The evolution from today's advanced driver assistance systems, which feature tools such as sensors and back-up cameras, will move to hands-free driving on highways, and eventually, to vehicles capable of self-driving anywhere.
As a result, Mobileye has designed the products in its portfolio to be modular. This gives automakers the ability to pick the appropriate level of ADAS and autonomous capabilities for each car model, as well as to scale up in technical complexity based on consumer demand.
As public interest in self-driving tech increases, Mobileye will be ready with progressively comprehensive capabilities. These include sensors, cameras, and radar for the car to "see" the road, software that defines driving safety criteria, redundant systems to ensure constant system uptime, and real-time mapping abilities to analyze traffic and road conditions.
Mobileye's financials
Mobileye's impressive technology, and its wide adoption among automakers, translated into sales of $2.1 billion in 2023, up from $1.9 billion in 2022. The company also achieved cost efficiencies, allowing it to reduce its net loss from $82 million in 2022 to $27 million last year. In fact, Mobileye was profitable in the fourth quarter as net income rose 110% year over year to $63 million.
The company exited 2023 with a strong balance sheet. Its total assets of $15.6 billion included $1.2 billion in cash and equivalents. Total liabilities were only $653 million and included no debt.
Despite its solid 2023 results, Mobileye expects its revenue to drop in 2024. The low end of its guidance range is just $1.8 billion in sales, which would be a double-digit percentage decline from last year. This expected revenue drop relates to lingering ripple effects from the COVID-19 pandemic.
The pandemic caused a host of supply chain issues, and in an effort to get ahead of potential further constraints, automakers stocked up on Mobileye's products when they could. This left them with surpluses once those supply chain issues were resolved, reducing their need to purchase Mobileye products this year. Based on that outlook, investors bid the stock down. It eventually reached a 52-week low of $23.49 on Feb. 23.
Mobileye management expects automakers will work through their excess inventories of its wares in the first half of this year, allowing it to "get back to normalized revenue in the back half of 2024," according to CEO Amnon Shashua.
Making a decision about Mobileye stock
Mobileye's anticipated revenue decline this year may have caused its stock to drop, but that creates a potential buying opportunity for investors willing to wait for sales to rebound. Shares have already recovered a bit although the price remains well below the 52-week high of $47.41 achieved in May. Moreover, the consensus among Wall Street analysts is an overweight rating on Mobileye stock.
That said, investing in this company carries plenty of risk. Fully self-driving vehicles remain many years off. In that time, regulatory hurdles could change as public use of these automobiles begins.
In addition, Mobileye faces plenty of competition in the space. A slew of much larger companies are working on self-driving technology. Rivals include Alphabet-owned Waymo, General Motors, Tesla, and AI powerhouse Nvidia. Mobileye customer Volkswagen has also indicated it intends to someday transition to an in-house system it's developing.
Despite these challenges, Mobileye possesses many advantages that should help it capture a healthy share of the growing ADAS and self-driving market.
The company's competitive strengths include robust technology, decades of experience, and driving data from around the world enabling it to meet local regulatory requirements. These factors make Mobileye a compelling growth stock over the long term.
