Al Root
Shares of autonomous driving technology provider Mobileye were down Wednesday after catching a downgrade to Sell from Hold.
BNP Paribas Exane analyst James Picariello also lowered his price target to $12 from $14, almost 10% below recent levels.
"2024 proved to be a major reset year for Mobileye," wrote Picariello.
In January, Mobileye management told investors its first-quarter sales would fall about 50% year over year from the $458 million generated in the same quarter of 2023. Wall Street expected sales of almost $560 million.
Too much inventory with customers was the main issue. Shares fell 25% to just under $30 apiece on the day of the warning. The stock has languished since then as Wall Street revised its full-year sales estimate -- to $1.6 billion from $2.6 billion.
In midday trading, shares were off 2.2% at $13.14; the S&P 500 and Dow Jones Industrial Average were both close to flat. The stock is off about 70% this year.
Picariello believes another "reset event" is coming. He expects volumes with Zeekr, Porsche, and Volkswagen will disappoint. His projected 2025 operating profit of about $390 million is far below the consensus compiled by FactSet of about $450 million.
Slowing industry sales growth in China and Europe aren't helping the company either, he added.
All the cuts and declines leave Mobileye trading for about 27 times estimated 2025 earnings per share, which is good for an auto supplier. Shares of Aptiv and BorgWarner trade for about 9 times and 7 times, respectively.
One reason for a better multiple is the expectation for better long-term growth. Mobileye is a leader in autonomous driving technology that is being adopted by auto makers around the globe. Most self-driving technology doesn't let drivers stop paying attention but that is changing too.
Alphabet's Waymo is completing more than 100,000 truly self-driving taxi rides a week. And Tesla is hosting a robotaxi day on Oct. 10 to outline how it will use self-driving technology to delivery autonomous cabs.
As for Mobileye, Picariello is unusually in his bearish take. Only three out of 30, or 10%, of analysts covering the stock rate shares Sell -- a similar ratio for stocks in the S&P 500. About 60% still rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
The average analyst price target for Mobileye stock is about $23 a share, down from about $48 at the beginning of the year. The bulls have had to cut their price targets too as Mobileye estimates moved lower.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
October 02, 2024 11:33 ET (15:33 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments