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Check Out Suhail Capital's Mobileye Short Thesis From August

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Check Out Suhail Capital's Mobileye Short Thesis From August
  • Suhail Capital's Jalal Faruki presented a short thesis on Mobileye NV (NYSE: MBLY) back in October.
  • Citron Research also named Mobileye as its top short idea for 2016.
  • Faruki noted that Mobileye designs a product (autonomous driving technology) specifically for a sector that remains illegal in most of the world.

Citron Research named Mobileye its top short idea heading into 2016, which prompted a defense of the company by several top-tier Wall Street analyst firms.

Mobileye's outlook is turning into a prime bull versus bear battle, and Jalal Faruki of Suhail Capital, a Dubai-based hedge fund, presented the bear case to Sum Zero back in August.

Related Link: Wall Street Backs Mobileye

The Bear Case

Faruki noted that autonomous driving is not legal in Mobileye's home country of Israel, nor is it legal in most of the world. Meanwhile, the company has reached an "absurd valuation" due to "hype" from an "exuberant" sell-side. The hedge fund manager also noted that shares of Mobileye were trading at 80x sales and this fact alone proved to be "seemingly obvious" to his short thesis.

Faruki acknowledged that while Mobileye's technology remains "leagues ahead" of any competitor, the company's products still remain a "small piece of a much larger puzzle," which "doesn't support long term monopolistic margins predicted by the sell side."

Faruki continued that Mobileye is in the unfortunate position; any industry behemoth with billions of dollars in R&D at their disposal can "catch up in what will seem like a blink of an eye."

"The stock is an attractive immediate short until it hits $30," Faruki concluded. "Longer-term the downside could be much greater so for a patient investor anything over $50 is a great entry point."

Image Credit: By Noa.mobileye (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Latest Ratings for MBLY

DateFirmActionFromTo
Apr 2017BairdDowngradesOutperformNeutral
Mar 2017PiperJaffrayDowngradesOverweightNeutral
Mar 2017Goldman SachsDowngradesBuyNeutral

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