The trend to automate vehicles started long ago when adding safety features and electrification. Now we have advanced driver assistance systems, which refers to any technology that makes driving easier and safer. Most new cars today have some form of ADAS in them, giving rise to the companies that formulate these technologies.
Mobileye Global Inc. (NASDAQ:MBLY) is one such company that makes and deploys ADAS technologies. It has made the technology widely available. While it trades independently on Wall Street, chip giant Intel Corporation (NASDAQ:INTC) still holds a majority ownership in it.
Over the past nine months, Mobileye’s stock has gained close to 15%. After a solid earnings report, the stock has picked up pace. Over the past month, it has gained about 23%.
On the other hand, Mobileye is trading at a stretched valuation multiple. Its price is sitting at 57.73x its forward non-GAAP earnings and 38.11x its forward cash flow. Both values are significantly extended in comparison to the industry average.
So will Mobileye pull back or surprise Wall Street with more upside?
Advanced Driver Assistance Systems Market
Last year, the Partnership for Analytics Research in Traffic Safety (PARTS) released a study on the market penetration of ADAS systems.
Based on the findings from the dataset of approximately 98 million passenger vehicles sold in the U.S., covering 168 different models from 2015 to 2023, produced by nine automobile manufacturers, the study showed that 10 out of 14 ADAS features surpassed 50% market penetration by 2023, and out of them, five exceeded 90% penetration. This shows that these systems are extremely high in demand at the moment.
The current ADAS market landscape is rapidly evolving. Artificial intelligence, machine learning, and sensor fusion technology have made these systems even more sophisticated than they were.
On top of that, the ADAS industry is leaving behind costly hardware like radar and LiDAR. So, cost-effectiveness has also been a key talking point here.
According to a report by Markets and Markets, the global ADAS market is expected to expand from 359.9 million units this year to 652.5 million units by 2032, growing at a CAGR of 8.9% over this period. The market is expected to stay buoyant due to the role of ADAS in driving the development of autonomous vehicles, which are considered the future of driving.
What Has Been Happening with Mobileye?
Late last year, Mobileye took some notable steps to safeguard its future growth. First of all, it stopped developing its next-generation frequency modulated continuous wave lidars. Management assessed it less essential to their roadmap than had originally been theorized.
One major reason for the lidars losing their prominence was the strong development of the company’s progression of its EyeQ6-based computer vision perception.
Mobileye is trying to wind down its LiDAR R&D unit. This affects about 100 employees, while not having a material impact on its results. On the other hand, the firm has also asserted that it will avoid lidar development spending in the future.
In a major partnership announcement last year, the company announced a partnership with Lyft, Inc. (NASDAQ: LYFT). The firms are collaborating to commercialize AV technology, using Lyft’s 40 million annual riders as a demand platform for Mobileye’s Drive-based AV fleets. This year, Lyft confirmed that it would roll out fully automated robotaxis in Dallas as soon as next year. These robotaxis will be made using Mobileye’s technology.
In addition, the Volkswagen Group announced that it had partnered with Mobileye and Valeo to upgrade the ADAS system in Volkswagen’s MQB-based upcoming vehicle portfolio to Level 2+ (which basically indicates enhanced partially automated driving).
These capabilities stretch beyond hands-free driving in specific conditions on approved highway sections, to a lot of capabilities that make driving much easier and automated.
How Is Mobileye Doing at the Moment?
Mobileye last reported its first quarter results for fiscal 2025 with revenue coming in at $438 million, which showed a jump of 83% from the prior year’s period. It cited the normalization of order activity after the firm drew on its inventory at its Tier 1 customers.
A similar level of amortization of its intangible assets on a significantly higher revenue base led to a 2,467 basis points jump in its gross margin to 47%. Mobileye’s adjusted gross margin increased by 680 basis points to 69% due to changes in the mix of volume between its EyeQ SoC and SuperVision offerings.
Mobileye has become profitable on an adjusted basis, posting earnings of $0.08 per share for the quarter, which was a huge turnaround from the loss per share of $0.07 it had posted a year earlier.
Management also reaffirmed its full-year 2025 guidance, expecting revenue between $1.69 billion and $1.81 billion, and expects to generate an adjusted operating income between $175 million and $260 million.
Is MBLY Stock a Buy Now?
Mobileye stock has upside potential to $18.97 per share, making it an attractive buy with 19.6% upside potential according to the consensus among analysts.
With revenues annually pacing $1.8 billion and top line growth of 18.8% annually forecast, Mobileye has the opportunity to drop some of its growth to the bottom line and spark a share price rebound.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.