Whereas investing in expertise shares is a sophisticated enterprise, we attempt to make our methodology as simple, clear, and goal as potential. With a purpose to construct out our Nanalyze Disruptive Tech Portfolio and canopy the important thing funding themes that we imagine shall be most impactful sooner or later, we now have needed to make some laborious decisions in some classes with slim pickings. For instance, the SPAC-ification of shares a number of years in the past launched a bunch of firms to the general public markets earlier than they have been able to carry out. That’s why we solely like a number of out of greater than 100 SPACs we’ve lined over time. Nanotechnology within the type of gene-editing and artificial biology is one other high-risk sector the place we now have positioned a number of bets as a result of we imagine the funding thesis is strong, regardless of underperformance by particular shares.
Final 12 months, we determined to go lengthy Mobileye (MBLY) inventory as a result of we imagine within the long-term disruptive potential of self-driving vehicles. Because the market chief in superior driver-assistance techniques (ADAS) with a give attention to creating autonomous car (AV) expertise, Mobileye represents the very best alternative to speculate instantly within the AV theme outdoors of perhaps Tesla (TSLA). When income progress slowed down in 2023, accompanied by bearish 2024 steering, we noticed this as a shopping for alternative when Mobileye’s valuation dropped sharply. The corporate launched its year-end outcomes final month, so time to test again in.
Our Earlier Issues About Mobileye
First, we wish to revisit our earlier issues about Mobileye and clearly outline the questions that we wish to reply based mostly on the outcomes from the 2024 earnings report.
Extra buyer stock of EyeQ system-on-chips (SoCs), the corporate’s flagship ADAS product that accounts for upwards of 90% of income. An excessive amount of present stock means fewer gross sales in 2024. Mobileye anticipated a 9% drop in 2024 income as prospects cleared out the backlog.
So, what was the ultimate quantity in 2024?
Can we anticipate a bounce again in 2025?
About 30% of income comes from China by way of unique tools producers like Zeekr and Polestar.
Have been gross sales up or down in China in 2024?
What’s the outlook for 2025?
Competitors from the likes of NVIDIA and Qualcomm in creating increased ranges of robotic AV tech. The previous reportedly has $14 billion within the pipeline and the latter greater than double that. Mobileye is banking on SuperVision, a platform that mixes almost a dozen cameras, radars, and software program for hands-free operation underneath sure situations resembling freeway driving (so-called Degree 3 autonomy).
Is SuperVision experiencing tremendous gross sales but?
How a lot of Mobileye’s $17 billion product pipeline has the corporate been in a position to convert into real-life gross sales?
$11 billion in goodwill, lingering from Intel’s 2017 acquisition, stays on the steadiness sheet, creating long-term impairment danger. Principally, the corporate would take a paper loss in earnings and worth.
Did Mobileye certainly take a success final 12 months?
If that’s the case, can we anticipate additional impairment prices?
Now let’s crack open the 2024 earnings report and get some solutions.
Mobileye Inventory Drives Off a Cliff
Properly, the quick reply throughout the board: Issues obtained fairly ugly final 12 months and 2025 just isn’t shaping as much as be significantly better. Mobileye inventory is down almost 40% for the reason that final half of 2024, in comparison with a 20% acquire by the tech-heavy Nasdaq, reflecting the dismal outcomes. Maintain studying for the total particulars.
Revenues are Down
Mobileye’s This fall-2024 income fell 23% from a 12 months in the past to $490 million, capping a 12 months the place whole income dropped to $1.65 billion – a 20% year-over-year decline. The first perpetrator? A glut of six to seven million extra EyeQ chips held by prospects, a hangover from pandemic-era provide chain anxieties. SuperVision, Mobileye’s premium $1,500-per-car Degree 3 autonomous platform, underwhelmed (extra on that under).
For 2025, Mobileye conservatively forecasts income of $1.7 to $1.8 billion, a tepid 6% progress on the midpoint and under the place the corporate was three years in the past in 2022. The income steering is principally based mostly on EyeQ volumes within the vary of 32 million to 34 million items. We are saying “conservatively” as a result of administration is explicitly lowballing its estimate to keep away from having to difficulty new steering throughout 2025 if the worst-case situation performs out. And what’s the worst-case situation?
SuperVision Gross sales Much less Than Tremendous
Let’s begin with SuperVision. Administration tasks gross sales of Mobileye’s Degree 3 AV platform, within the “low 20,000-unit vary on the midpoint, assuming no growth into the U.S.” Whereas the corporate didn’t present closing gross sales figures for SuperVision in 2024, it had guided to 185,000 items. The dramatic drop, partially, seems to be associated to Zeekr, a premium electrical car (EV) firm owned by Geely, certainly one of China’s largest auto producers. Zeekr, which at the moment accounts for between 2,000 and three,000 SuperVision techniques per 30 days, is trying to go together with an in-house system on its newest EV mannequin. Moran Shemesh, Mobileye chief monetary officer, mentioned SuperVision gross sales will stay area of interest for the foreseeable future.
I’d word that in the interim, we don’t plan on expressly addressing SuperVision volumes within the close to time period. Till we start launching this method on extra merchandise with western OEMs in 2026, we don’t anticipate it to be vital sufficient to name out, and we are going to set expectations low sufficient that any variances to draw back usually are not materials.
We’re not too excessive on an organization purposefully setting low expectations. Mobileye CEO Amnon Shashua did set 2027-2028 because the goal window for widespread Degree 3 adoption, which additionally contains the corporate’s hands-off, eyes-off AV tech stack Chauffeur. He cited ongoing pre-production testing with automakers like Volkswagen and Porsche. So, it seems like a lot of that $17 billion income pipeline stays extra of a pipe dream at this level.
Competitors Places Mobileye at a Crossroad
Further macroeconomic headwinds are blowing out of China, from a hypercompetitive and oversaturated EV market to geopolitical tensions with america. Mobileye’s 2025 steering assumes a 500,000-unit discount in shipments of EyeQ chips to China. And whereas administration tried to downplay the potential lack of Zeekr as a one-off anomaly, there’s a menace of additional vertical integration by prospects, notably in China the place they’re pleased to tear off replicate present applied sciences extra cheaply and effectively. Homegrown Chinese language firms like Horizon Robotics are additionally creating ADAS tech and Degree 3 techniques (and past) that might be aggressive with Mobileye within the subsequent few years. Geographic focus abruptly turns into a good greater concern.
As we famous earlier, Mobileye can be going through competitors within the AV market from main semiconductor producers like NVIDIA and Qualcomm. The previous is particularly energetic, with a multi-layered platform for producing artificial knowledge to assist practice AI driving fashions, in addition to an in-vehicle supercomputer for processing real-time sensor inputs. Companions embrace Toyota, which is adopting NVIDIA tech for next-generation ADAS options, and Aurora-Continental, which plans to deploy Degree 4 autonomous vehicles by 2027 utilizing NVIDIA’s DRIVE Thor chips. Uber, Mercedes-Benz, Volvo, and Chinese language EV leaders like BYD and NIO are additionally prospects. In Q3-2025, NVIDIA reported $449 million in income associated to its automotive and robotics enterprise, up 30% from the earlier quarter and 72% from a 12 months in the past.
In the meantime, Qualcomm is rapidly gaining traction with its modular self-driving tech stack that integrates ADAS, infotainment, and a single-chip AV system. Companions embrace acquainted names like Toyota, Hyundai, Volkswagen, and plenty of extra. Whereas nonetheless a comparatively small share of whole gross sales, income from Qualcomm’s automotive options is surging. The corporate just lately reported a file $961 million in Q1-2025 gross sales, up 61% from a 12 months in the past. It marks the sixth consecutive quarter of file automotive income. On an annualized foundation, Qualcomm is incomes twice as a lot as Mobileye, regardless that automotive solely accounts for lower than 10% of whole income.
This may not be the primary time that we now have famous that the longer it takes for the AV market to mature, the extra time rivals NVIDIA, Qualcomm, Horizon Robotics, Tesla, et al, must erode Mobileye’s market management.
Mobileye Inventory Loses Worth
And our final bullet level about goodwill impairment? As they are saying, an image is price a thousand phrases. Try Q3-2024:
When Intel acquired Mobileye for greater than $15 billion in 2017, a lot of the acquisition worth was allotted to goodwill, which is the premium paid over Mobileye’s tangible belongings. This goodwill remained on Mobileye’s steadiness sheet after its 2022 IPO. By Q3-2024, Mobileye’s market cap fell under its ebook fairness worth, forcing the finance guys to realign the books to replicate market actuality. That resulted in a one-time $2.7 billion non-cash impairment cost. Why ought to retail buyers care about any of this, if these are simply paper losses? On one hand, we must always not fret an excessive amount of about it. Then again, it underscores the truth that Mobileye has been lengthy overvalued.
Conclusion
In the present day, we discover Mobileye inventory just about consistent with our tech portfolio, sporting a easy valuation ratio of about 7 ($14 billion market cap/$2 billion annualized income). Buyers eager on the corporate and the thesis is perhaps tempted to purchase extra shares. We’re going to take a wait-and-hold strategy, based mostly on our evaluation right here. We’re involved in regards to the lack of penetration by SuperVision, suggesting the timeline to up-level EV autonomy continues to be (as at all times) down the street. That leaves Mobileye with only one viable product – albeit a wildly profitable, market-leading one. Nonetheless, the next-generation EyeQ chip, which guarantees 10x the processing energy of the present mannequin, just isn’t slated for launch till 2026. It’s laborious to see Mobileye making a lot progress earlier than then based mostly on administration’s commentary.
