MobilEye stock is down 72% this year. This would scream a buy opportunity for any company with a decent potential. However, in MobilEye’s case, investors need to be careful despite the promising technology that the company makes.
Mobileye specializes in advanced driver assistance systems (ADAS) and autonomous driving solutions. It has been around for a quarter of a century and is based in Jerusalem, Israel. Since its acquisition by Intel in 2017, the company has become a key player in the automotive technology sector.
It makes three main products, all of which serve the automotive industry. Its Mobileye SuperVision technology is a comprehensive DAS platform that enables semi-autonomous driving capabilities. The MobilEye Chauffeur allows for fully autonomous driving and integrates advanced sensing technologies. The MobilEye Drive technology is focused on providing a full self-driving solution for various vehicles.
MobilEye’s end markets include passenger vehicles and commercial fleets. Its technology is also useful in Mobility-as-as-Service (MaaS) applications like Uber and Lyft. Current company customers include Volkswagen, BMW, Ford, Toyota, and Nissan.
The company has long been touted as a Tesla competitor. Despite its technological advancements, it hasn’t been able to grow at a pace that would resemble that of Tesla. It also doesn’t help that the company is in a cyclical industry that is experiencing a global slowdown. Due to this, the company’s best-case scenario for this year’s performance is a revenue in line with the previous year.
The probability of that best-case scenario happening is quite low. Companies like Stellantis, BMW, and Volkswagen have already cut guidance for the year. This has prompted RBC Capital to downgrade the company from Outperform to Sector Perform, lowering its price target from $14 to $11.
What should also concern the shareholders is the fact that some of the major auto manufacturers like Volkswagen, GM, Ford, and BMW are pursuing their own in-house autonomous driving systems. In a world where technology is advancing at a rapid pace, MBLY’s technology may become unattractive for automakers in a few years’ time. Despite the stock slump, the valuation of the stock remains too high to accommodate this downside scenario.
MobilEye is not on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held MBLY at the end of the second quarter which was 34 in the previous quarter. While we acknowledge the potential of MBLY as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as MBLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.