icon
icon
icon
icon
Upgrade
icon

MBLY sees inventory issues improving in Q2; Investors remain on the sidelines

AInvestThursday, Jan 25, 2024 10:57 am ET
2min read

Mobileye Global Inc. (MBLY) reported its earnings for the fourth quarter of 2023, surpassing expectations. The company, which focuses on the development and deployment of advanced driver assistance systems (ADAS) and autonomous driving technologies, recorded earnings of $0.28 per share, beating expectations by a penny. 

Revenues for the quarter increased by 12.7% year-over-year to $637 million, in line with Street estimates. Growth was driven by a 16% increase in EyeQ SoC related revenue.

Despite this growth, the Average System Price declined from $56.2 to $52.7. SuperVision shipments remained flat, but the revenue as a percentage of total revenue decreased due to the growth in the EyeQ SoC business. It is important to note that the company's gross margin increased by nearly 1 percentage point in the fourth quarter of 2023 compared to the previous year. 

Adjusted Gross Margin, a non-GAAP measure, declined by 5 percentage points due to the increased cost of EyeQ SoCs and associated price increases to customers. Operating Margin improved significantly by over 7 percentage points on a year-over-year basis, driven by lower costs attributable to amortization of intangible assets and stock-based compensation as a percentage of revenue. Adjusted Operating Margin, on the other hand, remained relatively consistent with a slight increase due to lower operating expenses as a percentage of revenue.

Mobileye's future business backlog continues to grow, with 2023 design wins anticipated to generate future revenue of $7.4 billion across 61 million units.

Investors should note the downside guidance issued by Mobileye for fiscal year 2024. The company expects revenues for FY24 to be between $1.83 billion and $1.96 billion, falling short of the estimated $1.98 billion. 

Mobileye acknowledges the potential impact of an inventory build-up at its customers on its growth in 2024. Nonetheless, the company remains optimistic about high visibility for first-quarter results and expects a substantial improvement in Q2 revenue, leading to revenue normalization in the second half of 2024.

Mobileye's leadership team, including CEO Prof. Amnon Shashua and Chief Technology Officer Prof. Shai Shalev-Shwartz, has played a crucial role in the company's success. With its headquarters in Israel and over 3,500 full-time employees, Mobileye is well-positioned in the Auto Parts industry. 

Currently, Mobileye is being covered by 22 Wall Street analysts, who rate the stock as a Strong Buy on average. The company trades at a market cap of $22.27 billion and an enterprise value of $24.91 billion. However, the forward price-to-earnings (P/E) ratio of 52.08 for Mobileye is higher than the current forward P/E for the S&P 500, which is 21.72. 

The MBLY chart shows that the stock experienced a significant drop on January 3rd, which correlates with the company issuing an earnings warning. Since then, the price action has been characterized by a steady decline, with the stock trending downwards. It has been trading below both the 50-day and the 200-day moving averages, which are considered bearish indicators. These moving averages are also trending downwards, reinforcing the negative outlook.

In the three weeks following the earnings warning, the stock has not shown signs of a strong recovery and has continued to make lower lows and lower highs, which is indicative of a bearish trend. The Bollinger Bands show that the stock has been trading closer to the lower band, suggesting that there is ongoing selling pressure.

Volume spiked significantly on the day of the earnings warning, which is common as investors react to such news. However, subsequent trading sessions have not shown comparable volume, which could imply a lack of conviction in buying at these lower levels.

The Relative Strength Index (RSI) dropped sharply on the earnings warning and has since remained relatively low, although it has not reached the oversold threshold of 30, which might suggest a potential for further decline or stabilization before any significant bullish reversal.

As the stock heads into the earnings report, the prevailing bearish sentiment from the chart, characterized by trading below key moving averages and a lack of significant bullish volume, could indicate that investors are cautious or pessimistic about the company's near-term prospects. However, any positive surprises in the earnings report could potentially lead to a reversal or at least stabilization in the stock's price.

The company's downside guidance for FY24 may concern investors. With its leadership team and focus on ADAS and autonomous driving technologies, Mobileye remains a notable player in the Auto Parts industry. Investors should weigh the potential impact of the inventory build-up on future growth while considering Mobileye's strong balance sheet and projected revenue growth from design wins.

$MBLY(MBLY)

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.