On Friday, Wolfe Research raised its rating on shares of Mobileye N.V. (NASDAQ:MBLY), a global leader in advanced driver-assistance systems, from Peerperform to Outperform, setting a price target of $41.00.
This adjustment follows a period of underperformance for Mobileye's stock, which has seen a 28% decline this year, in contrast to the broader market trends with the S&P 500 up by 5%, semiconductor stocks rising by 30%, and auto suppliers experiencing a 10% dip.
The downgrade earlier in the year was influenced by two primary factors: revised near-term earnings expectations after Mobileye announced on January 4 that it would be destocking 6-7 million units of its base EyeQ chip inventory, and recalibrated medium-term earnings forecasts due to the need to adjust shipment projections for its Supervision system. However, these concerns are now considered to be past issues by Wolfe Research.
Wolfe Research's confidence in Mobileye is underpinned by the company's competitive position, particularly in its Supervision and Chauffeur systems, which are priced between $1,000 to $2,000 and $3,000 to $6,000, respectively. According to Wolfe Research, no clear competitor currently matches Mobileye's cost, performance, or scalability.
The $41 price target is based on a 35 times multiple of the company's projected 2026 earnings per share, which aligns with valuations of other high-growth companies. A conservative discounted cash flow analysis supports this target.
Wolfe Research anticipates that as Mobileye continues to secure more contracts for its Supervision and Chauffeur systems, investor recognition of the company's long-term potential will grow, particularly as these systems begin to scale significantly after 2025. Looking ahead to 2030, Wolfe Research suggests that there could be further upside toward the high-$50s for Mobileye's shares.
InvestingPro Insights
Following Wolfe Research's optimistic outlook on Mobileye N.V. (NASDAQ:MBLY), current InvestingPro data provides additional context for investors. With a market capitalization of $25.32 billion, Mobileye is a significant player in the advanced driver-assistance systems market. Despite not having turned a profit over the last twelve months, the company holds a strong balance sheet, with more cash than debt and liquid assets that exceed short-term obligations. This financial stability could be a reassuring factor for investors considering the stock's recent volatility, reflected in a year-to-date price total return of -27.85%.
InvestingPro Tips suggest that while analysts expect a sales decline in the current year, there is an anticipation of net income growth, and the company is predicted to become profitable within the year. This aligns with Wolfe Research's positive outlook on Mobileye's future earnings potential. Additionally, with the next earnings date on April 25, 2024, investors will be looking closely at the company's performance and future guidance.
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