Mobileye Narrows Q4 Guidance, Issues Downside 2024

Mobileye Holdings Inc. (MBLY) released its preliminary financial results for the fourth quarter of 2023 and issued guidance for the full year 2024, indicating a potential decline in revenue and profitability due to excess inventory at its customers. The companys revised expectations are a result of its standard planning process for 2024, which includes discussions with Tier 1 customers to determine potential orders for the year. 

For the fourth quarter of 2023, Mobileye expects revenues to be in the range of $634 million to $638 million, ahead of the $628 million consensus estimate. 

The companys full-year 2024 revenue outlook is set at $1.83 billion to $1.96 billion, significantly below the $2.56 billion consensus estimate. The main cause of the lowered expectations is the companys awareness of excess inventory at its customers, estimated to be between 6 million and 7 million units of EyeQ SoCs. 

This inventory buildup is primarily due to Tier 1 customers decisions to stock up on Basic ADAS products due to supply chain constraints in 2021 and 2022 and a desire to avoid part shortages, as well as lower-than-expected production from certain OEMs in 2023. Mobileye believes that most of this excess inventory will be used in the first quarter of 2024, and revenue will normalize by the end of the year. 

The company expects Q1 2024 revenue to be down approximately 50% compared to Q1 2023, with Q2 through Q4 2024 revenue remaining flat to up mid-single digits compared to the same period in 2023. Mobileye anticipates that inventory at its customers will be at normal levels by the end of 2024. 

The lower-than-expected volumes in the EyeQ SoC business are expected to temporarily impact profitability, with Q1 2024 operating loss predicted to be in the range of $257 million to $242 million. Excluding amortization of intangible assets and stock-based compensation, Adjusted Operating Loss for Q1 2024 is estimated to be between $80 million and $65 million. 

Following MBLYs downward guidance, shares of related auto semiconductor chip manufacturers such as ON (-3.3%), NXPI (-3.6%), and WOLF (-3.6%) experienced notable declines in the pre-market session. Furthermore, INTC also declined by 1.5% after the MBLY warning. Intel (INTC), which rolled MBLY out into an IPO in 2023, has also seen a decline of 1.5%. 

In summary, Mobileye has lowered its Q4 and full-year 2023 guidance, citing excess inventory at its customers due to supply chain constraints and lower-than-expected production. The company expects a temporary decline in profitability, but anticipates revenue to normalize in the second half of 2024, with inventory levels returning to normal by the end of the year. 

In summary, Cos narrowed guidance for Q4 (Dec) revenues falls within the projected range. However, their downside guidance for FY24 (Dec) revenues indicates a significant decrease compared to market expectations. The company attributes this to excess inventory at customers resulting from supply chain constraints and lower-than-expected production in 2023. They expect this excess inventory to be utilized in Q1 2024, leading to lower revenue in that period but anticipating normalized revenue for the rest of the year. The lower volumes in the EyeQ SoC business are projected to temporarily impact profitability. Following MBLYs warnings, related auto semiconductor chip manufacturers experienced declines in their share prices.

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