Improving Auto Supply Chains & Multiple New Product Launches Remain Tailwind For Mobileye: Analyst

  • Mizuho analyst Vijay Rakesh maintained Mobileye Global Inc MBLY with a Buy and raised the price target from $35 to $40.
  • Rakesh updated MBLY estimates post the company reported an inline September quarter and guided to an above-consensus December quarter top-line of $536 million, implying revenue growth of 51% Y/Y. 
  • Rakesh believed MBLY saw an upside from its SuperVision platform with ramps at Zeekr in 2022 and potentially Geely Automobile Holdings Ltd GELYF GELYY in 2023E. 
  • Rakesh expected gross margins to decline in 2023E as MBLY ramps lower-margin, much higher ASP, and new Consumer AV (Chauffer).
  • IHS released its updated C23E LVP estimates of ~85 million, up slightly from the prior November estimate of ~84.5 million, indicating 4% Y/Y growth after the expected 6% Y/Y growth in C22E.  
  • Rakesh was more cautious on 2023E LVP as the analyst saw the U.S. and global consumer weaker against a backdrop of increasing rates, with auto loan rates ranging from 7.5% to 12%+ impacting affordability and leading to dropping lead times, higher dealer incentives, and MSRP premiums dropping.
  • While 2023 could see Auto headwinds with a stretched consumer, improving Auto supply chains and multiple new product launches for MBLY could remain a tailwind. 
  • Despite macro headwinds, Rakesh saw MBLY well-positioned as the market leader in ADAS solutions. 
  • It has a 70% share and relatively less exposure to potential broader LVP weakness, as key front-camera ADAS take rates at ~50% + continue to grow with improved overall ADAS demand and stricter safety regulations. 
  • Rakesh believes MBLY continues to see a substantial upside as it continues to ramp with Geely's Zeekr unit while also picking up three additional premium design wins at Geely.
  • The analyst believes MBLY could see 2023-24E volume ramps at Honda Motor Company, Ltd HMCBayerische Motoren Werke AG BMWYY, and Toyota Motor Corp TM.
  • Price Action: MBLY shares traded lower by 3.77% at $33.20 on the last check Friday.
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