Mobileye (MBLY, Financial) is leading in the development of computer vision as well as machine learning, localization and mapping for ADAS (advanced driver assistance systems), data analysis, etc. It was almost a flat year for Mobileye in 2015, but the stock is down approximately 15% year to date. However, the company has performed amazingly well this year as it managed to surpass earnings as well as revenue estimates in the past three quarters.
In the recently reported quarter, Mobileye’s revenue and earnings escalated 34% and 27% year over year. On the other hand, the company’s gross profit has jumped from $12 million to $179 million in the past four years.
Moving onward, the company detailed that its OEM division performed well, producing sturdy volumes in ASPs (average selling price) and endured to expand visibility for new contract achievements.
Mobileye holds a robust position in the automotive industry, as it supplies cameras and sensors to around 90% of the automotive industry. But the company is now belligerently focusing on the driverless car market as it is projected to reach $42 billion by 2025, according to Bloomberg. The company’s products are going to be critical for autonomous vehicles to distinguish roadway lanes, barriers, etc.
The company also signed a deal with WABCO (WBC, Financial) to develop a solution for commercial vehicles that utilizes advanced emergency braking ADAS functionalities and Mobileye’s REM technology. However, the most significant thing is that the company partnered with Intel (INTC, Financial) and BMW (BAMXF, Financial) in July to introduce a fully autonomous vehicle platform to market in the impending five years.
On top of that, the company announced in August it plans to work with Delphi Automotive to produce a comprehensive self-driving system that will be accessible to any auto manufacturer beginning in 2019.
In point of fact, both the partnerships are pointing to Level 4 systems, which propose complete self-driving capability under limited situations. This clearly suggests that the company is headed in the right direction as Intel and BMW are formerly well-established players in the automotive industry.
Mobileye also established new contracts with prevailing auto manufacturers for its semi-autonomous Level 3 systems as well as advanced driver-assist systems.
Conclusion
Mobileye is growing at a strong rate and taking smart steps to grasp a strong position in the gradually rising self-driving car market. However, the shares of Mobileye look overvalued. It currently trades at 92 times earnings, which is substantially greater than the industry’s average of 25. As an outcome, investors should wait for a better opportunity to initiate a position in the stock.
Disclosure: I do not hold positions in the stocks mentioned in the article.
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