Driver Monitoring Regulation And Single Camera Architecture Will Transform Long Term Earnings Profile

Catalysts

About Tobii

Tobii develops eye tracking and in-cabin sensing technologies that are integrated into research, gaming, XR and automotive applications.

What are the underlying business or industry changes driving this perspective?

• Regulatory and safety rating momentum for camera based driver and occupant monitoring in Europe is turning DMS and OMS from optional features into mandatory safety systems, creating a long duration, volume driven software licensing opportunity that should support higher recurring revenue growth as platforms roll out from 2026 and beyond.
• The industry shift toward single camera, rearview mirror mounted DMS and OMS, validated by major OEMs and Tier 1s highlighting more than 30 percent lower system cost, positions Tobii’s SCDO as a preferred architecture that can expand win rates in RFQs and structurally increase the company’s addressable revenue per vehicle.
• Autosense transitioning from lumpy NRE driven income to more stable license revenue as awarded programs reach series production is likely to smooth quarterly volatility, raise software gross margins and progressively improve EBIT from the current loss making profile.
• Deeper integration with domain controller platforms such as Qualcomm Snapdragon Ride, where Tobii is pre integrated, lowers adoption friction for OEMs and Tier 1s, potentially accelerating design wins and driving higher software volumes and operating leverage in the Integration and Autosense segments.
• Ongoing cost reduction and efficiency initiatives, including a targeted SEK 100 million OpEx cut on top of earlier savings and consolidation of Autosense engineering in Romania, should reduce the break even revenue level and expand future net margins once top line growth from automotive and integrations resumes.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Tobii's revenue will grow by 12.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.2% today to 19.3% in 3 years time.
• Analysts expect earnings to reach SEK 254.0 million (and earnings per share of SEK 1.81) by about December 2028, up from SEK -11.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 12.3x on those 2028 earnings, up from -33.1x today. This future PE is lower than the current PE for the GB Tech industry at 16.2x.
• Analysts expect the number of shares outstanding to grow by 0.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.01%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistently weak demand in key markets such as the United States for the Products and Solutions segment could entrench the negative sales trend and limit the scale benefits needed to lift group revenue growth and restore healthy EBIT margins.
• Autosense remains a small, loss making contributor with lumpy, timing dependent NRE income. Any delay in the shift to higher margin, recurring license revenue or slower than expected ramp of SCDO volumes from 2026 could undermine the trajectory of earnings and net margin expansion.
• The company faces near term financing risk and is actively pursuing cost cuts, asset divestments and potential capital market options. This raises the possibility of shareholder dilution or suboptimal asset sales that could weigh on earnings per share and constrain future revenue growth investment.
• Leadership transition with the CEO resigning and the ongoing strategic review increases execution and strategic drift risk at a time when Tobii must compete for RFQs in XR and automotive. Any missteps could reduce win rates, pressuring long term revenue and operating margins.
• Competitive dynamics in XR and in cabin sensing, including lost design wins such as not supplying eye tracking to high profile headsets, suggest Tobii is not the clear market leader. If larger rivals capture a disproportionate share of growth, Tobii’s long term revenue scale and ability to reach sustainable positive net margins could be materially constrained.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK10.0 for Tobii based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be SEK1.3 billion, earnings will come to SEK254.0 million, and it would be trading on a PE ratio of 12.3x, assuming you use a discount rate of 10.0%.
  
• Given the current share price of SEK1.56, the analyst price target of SEK10.0 is 84.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.