Mobileye Global stock has been soaring—and its sudden surge is a mystery investors are still trying to solve.
A BMW sport-utility vehicle with Mobileye autonomous technology is shown at the Consumer Electronics Show in Las Vegas in 2023.
Mobileye stock has gained 2.5% to $32.47 on Monday—the S&P 500 has risen 0.3% and the Nasdaq Composite has gained 0.4%—after shares of the self-driving technology company rose 16% on Friday.
There were no news releases or upgrades to pin the gains on, nothing that stands out as particularly market moving. Yes, Canaccord analyst George Gianarikas met with management on Friday, but such visits aren’t unusual.
Most companies visit their shareholders and prospective shareholders, including Wall Street analysts, several times each year. And Gianarikas had no big news to report.
“The discussion spanned recent and increasing market segmentation, autonomous competition, and the highly topical technical debate regarding the ‘best’ approach to autonomy: neural nets (i.e., Tesla Full Self Driving) or the hybrid approach (Mobileye; Aurora),” wrote Gianarikas in a Monday report.
Tesla uses cameras and artificial intelligence-trained software in its driver-assistance product, which it calls Full Self Driving. The “hybrid” approach uses AI and machine learning, but relies on traditional software coding, too. The debate isn’t new and there doesn’t have to be only one winner from one self-driving winner.
Gianarikas rates both Mobileye and Tesla shares Buy. His target price for Mobileye is $37. His target price for Tesla stock is $222.
If the visit didn’t push Mobileye stock up, then what did? Wall Street data aggregator The Fly reported “bullish option flow” with a lot of buying of call options.
Call options give the holder the right to buy a stock at a fixed price in the future. It’s a bet that works out if the stock rises above that fixed price.
When a lot of options are created, it can generate some volatility in the stock. When a broker creates and sells a call option to a client, that amounts to a bearish bet: The broker stands to gain if the stock price doesn’t rise to the level that allows the option holder to cash in.
But a broker may just want to make money on handling the transaction, rather than making that bet. So sometimes the broker will buy the underlying stock to hedge the position and eliminate the risk of losing money on the call option.
Options activity might explain some of the gains on Friday.
Or it might be something else. In a Friday note, Mizuho’s Daniel O’Regan offered a number of possible reasons. First, Intel, which spun off Mobileye, got an investment from Apollo Global Management last week, and may be less likely to sell its remaining stake. Second, it might be a response to general positivity from the sell side, like the research referred to above. Finally, it might have gotten meme-d. Mobileye stock has also been popular with short sellers, and any of the above could have triggered a short squeeze given that short interest was 21% of the float.
Whatever the reason, Mobileye could use the help. Coming into the week, shares were down about 25% so far this year. Shares dropped about 25% one day in January after the company said customers were working through some inventory, which it said would lead to lower-than-expected sales.