Mobileye Global Stock Falls Amid Revenue Drop

by Warren Seah

Mobileye Global stock experienced a significant decline on Thursday following the company’s announcement of an expected 50% drop in revenue for the first quarter of this year.

The stock, currently trading at $28.85, saw a record decrease of 27%. If the shares close at this level, it would mark the lowest price since November 2022 when they finished at $28.51. In comparison, the S&P 500 remained flat, while the Nasdaq Composite experienced a slight decrease of 0.1%.

Mobileye revealed that it anticipates first-quarter revenue to be “significantly below” the $458 million generated during the same period in 2023. This forecast is attributed to an excess inventory of their EyeQ computer chips held by some customers. Analysts had projected a rise in first-quarter revenue to $557.1 million, indicating a substantial sales gap of approximately $320 million.

While this revenue warning may disappoint Mobileye investors, it is important to note that it is not indicative of a slowdown in the adoption of driver assistance technologies by automakers. Rather, the root cause of Mobileye’s problem lies in overproduction and channel inventories.

Mobileye Faces Setback in Short Term, but Analysts Remain Bullish

In a recent report, Citi analyst Itay Michaeli expressed disappointment over Mobileye’s update, but he does not view it as a significant change in the long-term thesis. Despite this setback, Michaeli still rates the company’s shares as a Buy, with a price target of $72. He remains optimistic about Mobileye’s growth prospects, projecting annual sales to reach $5 billion by 2026, compared to the estimated $1.9 billion for 2024.

Baird analyst Luke Junk also rates Mobileye shares as a Buy, with a target price of $50. Junk believes that the company’s reduction in forecasted revenue reflects an excess inventory of 6 to 7 million units. While this may have a negative impact in the near term, Junk suggests that the issue can be resolved within a single quarter.

Mobileye has reassured investors that the overall inventory levels at its customers will return to normal by the end of 2024. The company expects total revenue for 2024 to be in the range of $1.83 billion to $1.96 billion, which is below analysts’ previous expectations of $2.56 billion (according to FactSet). Additionally, Mobileye anticipates a full-year adjusted operating profit between $270 million and $360 million, significantly lower than the estimated $750 million expected by analysts.

The news of Mobileye’s revenue warning has also impacted its former parent company and majority shareholder, Intel. Following the announcement, Intel’s shares experienced a 1% decline, erasing earlier gains.

Despite the short-term challenges faced by Mobileye, analysts remain confident in the company’s long-term potential. The cautious outlook does not undermine their overall positive view on Mobileye’s growth trajectory and future profitability.

Intel’s Stake in Mobileye

Intel spun off Mobileye in 2022, yet it still maintains a significant 88% stake in the company as of the end of September. However, the decline in Mobileye’s share price poses a challenge for Intel as it diminishes a potential funding source. Last year, Intel sold a stake worth approximately $1.4 billion in Mobileye.

You may also like

Leave a Comment