Samlunch
06-08

$Mobileye Global Inc.(MBLY)$ 

$MBLY $GME

Mobileye 👁️ 21% short interest

Enterprise value roughly 25 Billion

They have free cash flow of around 296 million which is great, but like every tech company to entice talent they give out a lot of stock based compensation to the tune of around 250 m

What recently hit the stock in their last earnings report was a decel in revenue outlook of 9%. They are actually highly profitable with a 50% gross margin but they are heavily reinvesting in their self driving. Their products are good from driver assist to full self driving and they have deals with Volkswagen which is the largest car company in the world and have inked deals with many of VW brands like Porsche most recently

One of the things plaguing the stock last quarter is that 30% of their business comes from China, we saw with $BABA, $KWEB & many Chinese stocks with the country as a whole lagging economically as their GDP wasn’t doing great. We all know Chinese stocks couldn’t get out of their own way, even companies that are in the US but have large foot prints in China like, Starbucks, Nike, Apple, Tesla & many more were struggling with their businesses there. Mobileye was no exception

Mobileye has 94% institutional ownership with a big chunk of that being Intel. The CEO of Mobileye will tell you that the strategic ownership gives them access & security in all its chip making efforts & they receive parts/tech from Intel that they use in their systems as well. Intel being a major shareholder is part of my bull thesis when 21% of the MBLY shares are held short. With so much institutional ownership one has to wonder how there is such a huge short float. Cause just like gambling degenerates the shorts here are naked & leveraged up. With operating income down 50% the shorts have dug in. But have they over stayed their welcome on a company that still has a Forward PE of 44 & is highly profitable in all the right technologies as autonomy will be at the forefront of every major tech we have including robotics & AI

Besides Tesla & NVDA, Mobileye has a full suite of tech & has been developing it with great success for sometime. They have decades of experience & have robust data from all around the world which is an advantage as data is everything

Major consulting firms like McKinsey have published notes on the ADAS & autonomous driving markets at close to 300B just past 2030. Were close to 2025 - time flies & this company is at the epicenter to prosper from that large TAM for those investors willing to stick it out thru a temporary shortfall

The stock was $47 in May. China is rebounding & you can see that many of their stocks and the stocks that still have major footprints in China as mentioned like Apple and Tesla are already significantly off their lows

If we are going from monetary tightening by the FED to monetary easing as inflation subsides over time, then the lessening of financial conditions will bring interest rates down which should be a boost to smaller cap stocks and many stocks that have been punished in a high rate environment as long duration names like Mobileye are out of favor

One of the reasons for the above mentioned exacerbation is many smaller cap stocks especially tech ones are not profitable or will be on the future so high rates keeps the worry that as those companies need to refinance debt or take new debt that it will be too costly for them. So it’s difficult when there’s broad strokes like that across the entire small cap sector but that baby going out with the bath water is the opportunity for smart traders and investors to capture the delta between many companies being generalized and those that still have robust and key technologies with large margins and still are profitable and have good free cash flow

Mobileye is one of the stories that has been thrown out with the bath water, when they are in no desperation and make money with great tech. Shorts have overstayed their welcome.

Have You Shorted Any Stocks?
According to a report released by S3 Partners on Thursday, Short bets against Nvidia stand at $34 billion, nearly equivalent to the combined short interest of $Apple(AAPL)$ and $Tesla Motors(TSLA)$ . Do you have any experience shorting stocks? Did you make a significant profit or suffer heavy losses? Please share your experience.
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