EyeQ 6 Advancements And OEM Partnerships Will Drive Future Autonomous Technologies

Key Takeaways

• Strategic engagement in advanced markets like North America and Europe could lead to new design wins in SuperVision and ADAS technologies, driving potential revenue growth.
  
• Investments in technology and partnerships aim to boost operating cash flow by optimizing working capital and enhancing engineering efficiency, potentially improving future earnings.
  
• Uncertainties in OEM volumes and competitive threats from in-house development could negatively impact Mobileye's revenue and market share.

Catalysts

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

• Mobileye's EyeQ volumes are poised for growth due to high volume forecasts from Chinese OEMs, potentially impacting future revenue positively, despite a conservative approach in guidance to account for low visibility.
  
• The company's focus on continuous efficiency improvements in AI and silicon design, particularly with the EyeQ 6 generation, is expected to enhance operating margins and drive a substantial leap in performance and precision for future product lines.
  
• New wins in REM data harvesting and cloud-enhanced driving assist systems from major OEMs signal potential revenue growth as these deals strengthen global data capabilities, crucial for future autonomous driving technologies.
  
• Advanced product customer engagements, particularly in top markets like North America and Europe, offer future revenue potential, as they could lead to announcements of new design wins, especially around SuperVision and surround ADAS technologies.
  
• Mobileye's strategic investments in technology and partnerships are expected to support higher operating cash flow than net income in 2025, by optimizing working capital and enhancing engineering efficiency, potentially improving earnings.

Mobileye Global Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Mobileye Global's revenue will grow by 17.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -186.8% today to 1.4% in 3 years time.
• Analysts expect earnings to reach $36.5 million (and earnings per share of $0.05) by about April 2028, up from $-3.1 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $341 million in earnings, and the most bearish expecting $-317 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 556.7x on those 2028 earnings, up from -3.2x today. This future PE is greater than the current PE for the US Auto Components industry at 12.1x.
• Analysts expect the number of shares outstanding to grow by 0.66% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.89%, as per the Simply Wall St company report.

Mobileye Global Future Earnings Per Share Growth

Risks

• The company experiences uncertainties in its forecast for Chinese OEM volumes, which could negatively affect future revenue due to low visibility in this region.
  
• There is a risk that some OEMs, such as Zika, might choose to go in-house for their systems, potentially impacting Mobileye's revenue and market share.
  
• The reliance on current OEM forecasts, which may be overly conservative, could result in lower-than-expected revenue if these forecasts are inaccurate.
  
• The competitive landscape, including potential in-house development by OEMs and unknown completion timelines for proposed projects, might impact Mobileye's revenue stream.
  
• Assumptions of a higher gross margin due to lower SuperVision volume might not materialize if the anticipated ADAS adoption growth is slower than expected, impacting net margins.

Valuation

• The analysts have a consensus price target of $19.019 for Mobileye Global based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $33.0, and the most bearish reporting a price target of just $11.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $36.5 million, and it would be trading on a PE ratio of 556.7x, assuming you use a discount rate of 8.9%.
• Given the current share price of $12.3, the analyst price target of $19.02 is 35.3% 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.