This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

How MobileEye Drives Auto Industry to Its ‘iPhone Moment’

NEW YORK (TheStreet) –– As driverless cars become more present over the next several years, Wall Street believes that MobileEye (MLBY) is best positioned to benefit significantly from this trend.

Several investment banks initiated coverage on the Israeli-based MobileEye, following its successful initial public offering earlier this month. MobileEye, which counts automakers such as BMW, Audi, Jaguar Land Rover, Tesla (TSLA - Get Report)  , Ford (F) , Honda (HON) and Nissan (NSANY) as customers, shipped 1.3 million chips in 2013 to help automakers develop advanced driver assistance systems and semi-autonomous markets, noted Barclays Capital analyst Brian Johnson, who rates shares "overweight" with a $48 price target.

The company also believes its radar, sensor, microchip and camera technologies will allow it be the first to develop a semi-autonomous driving car at highway speeds. MobilEye is designing the first system for hands-free driving at highway speeds with two automakers, which it expects to launch in 2016.

Read More: Israel's Mobileye Looks to Driverless Car after Record IPO

"Just as PCs and smartphones transformed computing, software will change the way we drive, and MBLY will likely be at the forefront of that change," Johnson wrote in the note. "In our view, MBLY stock offers considerable upside potential given the company's strong competitive position in the advanced driver assistance systems (ADAS) and semi-autonomous markets, which should drive a 45% revenue [compound annual growth rate or] CAGR through 2020 (largely from ADAS) and a 14% CAGR from 2020-2025 (as semi-autonomous kicks in at scale)."

Shares of MobileEye were higher in early Tuesday trading, up 4.2% to $39.80.

Currently, only around 3% of the automotive market uses ADAS, but that's expected to move sharply higher within the next few years, as regulatory factors mandate it. Tesla CEO Elon Musk has talked about introducing an automated car in the past, potentially partnering with Google (GOOGL) , but noted that it would not come until at least 2016. 

Am a fan of Larry, Sergey & Google in general, but self-driving cars comments to Bloomberg were just off-the-cuff. No big announcement here — Elon Musk (@elonmusk) May 7, 2013

Mobileye, which generated $81.2 million in revenue in 2013 and $19.9 million in net income, has the chance to maintain its position in the Autonomous Emergency Braking (AEB) market, with its technology being at the core of 91% of the contracts won in the past three years, noted Deutsche Bank analyst Rod Lache, a position that is only like to increase. "And importantly, MobilEye appears to be expanding their lead by growing the functionality of their systems," Lache wrote in a note. "This is expected to include sophisticated software that will serve at the core of the world's first commercially available autonomously driving vehicles."

Lache expects 2014 revenue of $131 million to reach $736 million by 2018, and ultimately reach $2.5 billion by 2025.

MobileEye, which expects to launch its autonomous driving system with six more automakers by 2018, is seen as the "Intel Inside" for ADAS, notes Johnson, but it could be much more, argues Citi analyst Itay Michaeli, who rates shares "buy" with a $48 price target. It could be the industry's "iPhone moment."

"Mobileye's current ~80% share is staring at a $15+ billion LT addressable market (Citi '25E rev = $3.3bln) with high entry barriers and a competitive edge from large unbiased databases," Michaeli wrote in a note. "Mobileye
also sits in the most attractive leg of the supply chain; estimated NI margins >50%."

--Written by Chris Ciaccia in New York

>Contact by Email.

Follow @Chris_Ciaccia

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
MBLY $35.48 0.00%
TSLA $203.34 0.00%
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs