Wall Street Backs Mobileye

Shares of Mobileye spiked higher by more than 5 percent Thursday morning as Tesla Motors commented in a blog post that it has no plans to replace Mobileye's technology in its cars. "Going forward, we will continue to use the most advanced component technologies, such as Mobileye's vision chip, in our vehicles," Tesla commented in a

. "Their part is the best in the world at what it does and that is why we use it." Related Link:

While Tesla's blog post put to rest market chatter that it had plans to replace Mobileye's technology, investors still have to contend with the stock being named as a top short idea by Citron Research for 2016.

Brian Johnson of Barclays commented in a note that over the past few months he "dug deep" on Mobileye, including meeting with senior management at the company's headquarter in Israel. "Our interactions are timely, as the Mobileye bull-bear debate is heating up heading into the 2016 Consumer Electronics Show early next month," Johnson wrote. "Ultimately, we are increasingly confident that the moats around Mobileye's leadership in ADAS (advanced driver assistance systems) and semi-autonomous driving are widening." Johnson continued that at the Consumer Electronics Show, Mobileye is expected to announce updates to its autonomous driving software capability, including 360 degree vision based sensing, deep learning, and cloud based functionality. Accordingly, these upsides will confirm the company's "lead" against traditional Tier 1 auto suppliers and automotive chip makers. Bottom line, Mobileye's leadership position supports a "rapid" revenue growth and "impressive" margin expansion for the company. Shares remain Overweight rated with an unchanged $76 price target.

Rod Lache of Deutsche Bank commented in a note that while automakers are "seeking to foster competition" in artificial intelligence for autonomous driving, Tesla is likely to be amongst "the first in line" to purchase Mobileye's next generation processor starting in 2018. Lache continued that 25 other auto manufactures have "effectively endorsed" Mobileye as offering state of the art technology. The analyst added that even though Mobileye has not won every contract it attempted to gain, his research suggests that the company "continues to perpetuate the highest market share in the industry." Finally, Lache suggested that investors "generally underestimate" the difficulty in replicating Mobileye's current market position and the market, especially average selling prices, will "grow more rapidly than is widely assumed." Bottom line, Lache argued that Mobileye is "well positioned" for the future and more importantly, 2016 will prove to be a "catalyst rich environment" that could "serve to reinforce this view more broadly." Shares remain Buy rated with an unchanged $72 price target.