PacCrest Analysts Are 'Warming' To Mobileye, Make 'Animal House' Reference

Mobileye NV MBLY has had a rough month. The stock sold off sharply in late December after noted short-selling firm Citron Research reiterated its thesis and announced a $25 price target.

However, encouraging news out of the Consumers Electronics Show earlier this month -- which included a partnership with General Motors Company GM -- and a $4 billion autonomous driving initiative from President Barack Obama has the company in a brighter light.

Pacific Crest analysts are now starting to warm up to the stock.

In a note out titled "Was It Over When The Germans Bombed Pearl Harbor? No!", the firm said it is now incrementally more positive on Mobileye's automatic emergency braking (AEB) adoptions thesis. However, these developments over the last few weeks do little to change Pacific Crest's view "of having meaningful fundamental impact before 2018 or 2019 at the earliest."

The stock traded recently at $28.31, up 3.2 percent on the day.

Related Link: Mobileye Alert: Morgan Stanley Stays Bullish, But Slashes Price Target

After meeting with Mobileye's management team, Pacific Crest now forecast a two-year unit CAGR of 43 percent driving, 44 percent revenue growth and 48 percent earnings growth over the same period.

The stock still looks expensive, so the firm has maintained its Sector Weighty rating and is waiting for a better entry point.

Pacific Crest laid out a bull and bear case for Mobileye's stock.

Bull Case: $99 based on 20x 2020 EPS of $7.36

The firm listed several reasons for this case:

• "45% adoption with 70% market share = 32 million units."
• "80% of mix are core bundles at $50 ASP; 20% of mix are trifocal at $150 ASP = $70 blended ASP."
• "70% net income margin."
• "Aftermarket revenue represents 10% of total revenue in 2020"

Bear Case: $17 based on 20x 2020 EPS of $1.29

Reasons listed for this case:

• "45% adoption with 30% market share = 14 million units."
• "95% of mix are core bundles at $50 ASP; 5% are trifocal at $150 ASP = $55 blended ASP."
• "50% net income margin."
• "Aftermarket revenue represents 10% of total revenue in 2020."