Global Regulatory Tightening And Competition Will Stall Progress

Key Takeaways

• Tighter regulations, market commoditization, and shifting OEM strategies threaten Mobileye's margins, recurring revenue, and ability to maintain pricing power.
  
• Heightened geopolitical risk and intensifying competition from global carmakers jeopardize Mobileye's market share and long-term growth prospects.
  
• Broad industry adoption, strategic partnerships, and innovative scalable product platforms position Mobileye for sustained growth, market expansion, and strong long-term profitability.

Catalysts

Develops and deploys advanced driver assistance systems (ADAS) and autonomous driving technologies and solutions worldwide.

• Mobileye's future revenue growth is threatened by global regulatory tightening around AI and data privacy, which could significantly prolong validation and approval cycles for advanced driver-assistance and autonomous technologies-delaying time to market and potentially resulting in lost OEM contracts, ultimately limiting both top-line and recurring revenues.
  
• The company's heavy reliance on a capital-light, OEM-partnered, globally scalable deployment strategy exposes it to elevated geopolitical and supply chain disruption risk; ongoing de-globalization and rising trade barriers may restrict access to key international markets and drive up production costs, leading to long-term gross margin compression.
  
• Intensifying competition from both vertically-integrated OEMs such as Tesla, as well as technological catch-up from Chinese and global car manufacturers, jeopardizes Mobileye's position as the default technology supplier; sustained pressure on market share will reduce both revenue growth and operating leverage.
  
• As OEMs seek to push ADAS and autonomous features as standardized rather than premium offerings, price competition is set to intensify and average selling prices for Mobileye's systems and modules may erode, directly compressing net margins and putting downward pressure on earnings as industry commoditization accelerates.
  
• While Mobileye's roadmap is anchored on rapid scale-up of complex systems like Chauffeur and robotaxi, any high-profile delays, cost overruns, or failures in achieving the safety/scale benchmarks required for driverless deployments could force OEMs into further caution-causing additional program delays, lower order volumes, and hindered revenue realization in the key 2026-2028 timeframe.

Mobileye Global Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Mobileye Global compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Mobileye Global's revenue will grow by 5.7% annually over the next 3 years.
• The bearish analysts are not forecasting that Mobileye Global will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Mobileye Global's profit margin will increase from -153.9% to the average US Auto Components industry of 5.3% in 3 years.
• If Mobileye Global's profit margin were to converge on the industry average, you could expect earnings to reach $120.9 million (and earnings per share of $0.15) by about July 2028, up from $-3.0 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 106.2x on those 2028 earnings, up from -3.8x today. This future PE is greater than the current PE for the US Auto Components industry at 15.8x.
• Analysts expect the number of shares outstanding to grow by 0.5% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.26%, as per the Simply Wall St company report.

Mobileye Global Future Earnings Per Share Growth

Risks

• Mobileye continues to experience strong revenue growth and operating leverage, with Q2 revenue up 15 percent year-over-year, adjusted operating income up 34 percent, and operating cash flow exceeding $300 million in the first half, indicating robust business fundamentals and the potential for improving earnings and margin expansion.
  
• The company is seeing broad-based adoption and increased demand for its advanced products, including new, standardized surround ADAS systems, next-generation supervision, Chauffeur, and robotaxi capabilities, across multiple geographies and major OEMs, which positions it to capture an expanding addressable market and increase long-term revenue streams.
  
• Strategic partnerships with leading OEMs such as Volkswagen, Audi, Porsche, and integrations with demand generators like Uber, Lyft, and MOIA strengthen Mobileye's position in both consumer ADAS and the emerging robotaxi market, thus supporting recurring and diversified revenue potential over multiple years.
  
• Mobileye's innovation cycle remains strong, with rapid development and rollout of its EyeQ6 high inference chip, bundled product platforms, and highly efficient cost structure, all of which allow for superior scalability, cost competitiveness, and high value per vehicle-factors that support gross margin stability and future earnings growth.
  
• The company anticipates a significant 2027 revenue inflection point as major programs ramp up in supervision, Chauffeur, and robotaxi deployments, supported by production commitments from high-volume OEMs and expansion into new cities and services, which could drive a significant increase in sales, recurring subscription revenues, and overall profitability.

Valuation

• The assumed bearish price target for Mobileye Global is $12.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mobileye Global's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $31.1, and the most bearish reporting a price target of just $12.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $2.3 billion, earnings will come to $120.9 million, and it would be trading on a PE ratio of 106.2x, assuming you use a discount rate of 9.3%.
  
• Given the current share price of $13.95, the bearish analyst price target of $12.0 is 16.2% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• 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.