From Cabot Wealth Advisory 8/29/16 Sign up for Cabot Wealth Advisory—it’s free!
When it comes to investing in the technology behind self-driving cars, there is one stock that stands head-and-shoulders above the rest, fundamentally, if not technically.
Mobileye (MBLY), based in Israel, is the leading provider of driver-assistance software for vehicles. Its chips and algorithms have been integrated into new car models since 2007, providing features like forward collision warning, forward collision avoidance (when integrated with braking), lane centering and lane departure warning, pedestrian detection, general object detection and traffic sign detection.
Mobileye’s unique capability in the field is that its algorithms are all based on the inputs from a single monocular camera, a feature that makes the systems less complex and more affordable.
As a result, the company’s systems are already standard on over 20 auto brands worldwide, and Mobileye is now partnering with giants Intel and Delphi to enable a fully autonomous car that can be sold to consumers by 2021.
There have been a few bumps along the way, of course; the Tesla that was involved in a fatal collision with a semi in May had Mobileye technology on board, and Tesla has now parted company with Mobileye. But Tesla, which is now refining its own proprietary systems, accounted for only a small portion of Mobileye’s revenue, so it’s no big loss.
In fact, Mobileye is growing rapidly! The company enjoyed 68% revenue growth in 2015, 65% in Q1 2016, and 58% in Q2 2016, with after-tax profit margins of nearly 50%. Earnings growth is estimated at 48% in 2016 and 49% in 2017. And if Mobileye truly becomes the dominant provider of autonomous vehicle software, there’s no telling how big this company could be!
The stock’s P/E ratio, for those who care about such things, is now 77, which actually seems reasonable considering the company’s rate of growth and its high probability.
But as I hinted earlier, the stock has a ways to go technically.
Since coming public two years ago, the stock has been up and down and up and down and now we’re in another up cycle. Last week the stock hit a new high for the year.
But the stock’s old highs of 2014 and 2015 still stand, meaning the long-term trend of MBLY is basically sideways.
Additionally, while the stock’s relative performance line has been strong for most of this year, the more recent action shows the stock lagging the market slightly, suggesting that the stock may be cooling off (short-term) as public perception of self-driving cars reaches a fever peak.
In the end, the chart will tell the story, and I urge you to keep an eye on it.
Even better, become a regular reader of Mike Cintolo’s Cabot Top Ten Trader. Mike recommended MBLY to his readers a couple of weeks ago—with suggested buy range and loss limits—and if you become a regular reader you can get the same, for ten high-potential stocks every week. For more details, click here.
MobilEye (MBLY): A self-driving car stock
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.
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).
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6/1/15 Mobileye (MBLY): A self-driving car stock