The Future of Automobiles

 

Road Trip, Part Two

The Future of Automobiles

A Leader in Self-Driving Automobile Software

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Road Trip, Part Two

Last week, I presented an overview of my recent 17-day, 4,218-mile road trip to and through the American Midwest and back.

Today, I focus on the automotive aspects of the trip, with a little historical perspective as well as a look into the future.

The first amateur transcontinental automobile trip took place in 1908, when J.M. Murdoch drove his wife, two children, and a “competent mechanic” from Los Angeles to New York in a Packard “Thirty” Touring car. They carried three spare tires and nine spare inner tubes, as well as a wide assortment of tools, including shovels, lanterns, poles, pick axe, broad axe, sledgehammer, winch, rope, camp stove, cooking supplies, buckets, extra gasoline, cylinder oil and more. They covered 3,694 miles in 32 days, 5 hours and 25 minutes, breaking the transcontinental record by a substantial amount—even though they “laid over” for rest on Sundays and two other days.

Our preparations were simpler.

I made hotel reservations for every night.

I bought an up-to-date atlas, so we could get a big-picture view of our surroundings while the Tesla (armed with Google Maps) took care of the precise navigational details.

My wife stocked up on water and healthy snacks, so we were never reduced to eating junk food or road food.

I topped off the windshield washer fluid (the only owner-accessible liquid in the Tesla).

I bought an extra can of Fix-A-Flat (the Tesla carries no spare tire).

And I made a detailed plan of exactly where we would recharge (with alternate plans as well).

And the planning paid off. We suffered no flat tires and slept comfortably every night, exactly as planned.

Our only hardship, as some would call it, was making 33 charging stops, where a comparable gasoline-fueled sedan, say a BMW 7-class, might have used as few as 11 fueling stops.

But the BMW’s fuel would have cost nearly $700, while I paid for charging only once (in Memphis). I did, however, pay for parking (generally in hotel garages) seven times, in part to get “free” overnight charging.

For the record, we used 14 Tesla Superchargers, which recharged the battery very quickly (at rates up to 375 miles of charge per hour), 18 Level 2 chargers, which recharged the battery at rates ranging from 16 to 45 mph (fine for overnight charging), and one simple 110-v wall outlet (in Canada), which recharged the battery at a tortoise-like 4 mph.

And the time spent charging gave us time to take bathroom breaks, stretch our legs, and meet some interesting people, like this Harley Davidson salesman in Albert Lea, Minnesota. (He’s been selling Harleys for 30 years and his interest in electric cars is less than Vladimir Putin’s interest in transparency.)

cwaphoto6_1 

Other general observations:

Driving is easy in Iowa. Not only are the cars far apart, but the roads are straight, and no one’s in a hurry! On the east coast, the cars are close together, traffic patterns are crazy and almost everyone is in a hurry! I believe there’s a correlation.

Truck drivers are dependably good drivers; in fact, we had a great time saving energy by drafting behind trucks on I-40 between Little Rock and Memphis.

On the other hand, the scariest drivers on the road are the people who use their phones to text or check Facebook while they drive.

Overall, it was a fabulous road trip, and I’m very happy we did it.

And I’m very excited about the revolutionary changes I see coming for the automotive industry.

The Future of Automobiles

The shift from fossil fuels to renewable energy sources is well under way and will accelerate as automobiles using these new energy sources become more competitively priced and more convenient to use—which will bring some creative destruction to the energy industry. (Most people don’t see it coming yet, but that’s typical when it comes to long-entrenched technologies.)

Self-driving cars are becoming practical now, and not a minute too soon. The sooner we can get the steering wheels out of the control of those multi-tasking motorists and under the control of logical machines the better. (The insurance companies know this day is coming, and they’re planning for an era of sharp reductions in claims.)

Car-sharing will proliferate, as options like ZipCar and Uber and Lyft make automobile ownership less attractive. And as we leave more and more of the driving to professionals and machines, more and more people will forego the opportunity to learn to drive altogether.

The number of automobile dealers will shrink dramatically, as the industry consolidates under the forces of shrinking sales (all that car-sharing) and direct-to-consumer sales models like Tesla’s. CarMax (KMX) and AutoNation (AN) are leading the way here.

Parking will become less of a problem, as a shrinking number of cars, combined with cloud intelligence, enable a more rational allocation of parking resources.

In short, the future looks bright, especially for people who like change!

Moving on to the market.

The main trend remains up. In fact, recent weeks have seen many growth stocks showing persistent strength, extending their advances rather than succumbing to profit-taking as they might have earlier this year.

So I think it’s worth looking at a stock that is poised to be a big beneficiary of the move to self-driving cars.

MobilEye (MBLY)

MobilEye is the world leader in self-driving automobile software. Its systems (primarily based on monocular camera views) are currently used by, or in development for, GM, Ford, BMW, Mitsubishi, Honda, Chrysler, Mini Cooper, Nissan, Jaguar Range Rover, Scania, Volvo, Opel, Hyundai and Yulon.

The company’s Advanced Driver Assistance Systems (ADAS) include, but are in no way limited to, Pedestrian Collision Warning, Lane Departure, Forward Collision Warning, Headway Monitoring, Intelligent High Beam and Speed Limit Indicator.

In 2012, revenues were $40 million, in 2013, revenues were $81 million, and in 2014, revenues were $144, so you can see there’s a great growth trend here. Furthermore, the company knows how to translate revenue into earnings. It first turned profitable in 2013, and analysts are now looking for earnings of $0.39 per share in 2015, up 77% from 2014.

Valuations are high (the forward P/E is 120) but that’s typical of great growth stocks that investors are getting excited about.

As to the chart, MobilEye came public in August 2014 at 25, soared to a peak of 60 just nine weeks later, and then cooled off—dramatically—bottoming at 32 at the end of February. That post-IPO droop isn’t uncommon and serves to get rid of all the hot money.

cwachart6_1 

Since then, MBLY has been under accumulation, and in recent weeks, it’s been building a nice base at 47, setting up for a renewed advance toward its old high of 60.

Ideally, the stock will correct slightly here and you can buy down at the 50-day moving average (currently at 45).

Better yet, however, would be getting the most current opinion of Cabot’s top growth analyst, Mike Cintolo, who recommended MBLY back in April and updates his readers every week on its status—while presenting a full slate of new stocks with similar technical characteristics.

Mike’s Cabot Top Ten Trader is the #1 choice of active investors/traders who want to stay abreast of what’s happening in the market’s strongest stocks.

For details, click here.

Yours in pursuit of wisdom and wealth,

Timothy Lutts

Chief Analyst of Cabot Stock of the Month and Publisher, Cabot Wealth Advisory


Timothy Lutts can be found on Google Plus.

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