Mobileye gets poked on weak forecasts, buying opportunity

Key Points

• Mobileye is the leading producer of advanced driver assistance systems (ADAS) commanding a 65% to 70% market share of the industry.
• Mobileye’s ADAS system-on-a-chip (SoC) units are installed in over 125 million vehicles worldwide.
• Inventory glut with its Tier 1 auto manufacturers prompted Mobileye to cut its 2024 forecasts mostly impacting Q1 2024 as normal levels should return by years end.

Advanced driver assistance systems (ADAS) and autonomous driving technology provider Mobileye Global Inc. NASDAQ: MBLY shocked investors when it unexpectedly cut its fiscal 2024 guidance on Jan. 4, 2024. Shares collapsed 24% in reaction. The gloomy outlook stemmed from an inventory glut arising from the pandemic-driven supply chain shortage.

Tier 1 automaker customers ordered excess ADAS system-on-a-chip (SoC) inventory during 2021 and 2022 to avoid repeating production problems with missing parts. The computer and technology sector company still expects to sell over 1 million units of its most advanced ADAS, SuperVision, by 2026. Could this short-term hiccup present a buying opportunity?

ADAS SoCs

Modern cars are evolving with advanced driver assistance systems (ADAS). Mobileye incorporates artificial intelligence (AI), computer vision, localization, mapping and machine learning technology in the development of its SoCs. It’s features can range from basic features like lane departure and forward collision warnings, automatic emergency braking and traffic sign recognition to advanced features like adaptive cruise control, lane change, traffic jam and highway assist functions depending on the car model and manufacturer.

It’s SuperVision units are the most advanced systems utilizing AI, lidar, radar and HD mapping to perform evasive maneuver assistance and autonomous lane changes.  

Pandemic driven inventory glut

As part of its standard planning process for 2024 to determine potential orders, Mobileye discovered in its discussion with Tier 1 customers the presence of excess inventory amounting to six to seven million units of EyeQ system-on-a-chip (SOC). EyeQ is its basic ADAS units. Mobileye supplies ADAS units to over 50 original equipment manufacturers (OEMs), including General Motors Co. NYSE: GM, Ford Motor Co. NYSE: F, Toyota Motor Co. NYSE: TM, Volkswagen AG OTCMKTS: VWAGY, BMW and China-based electric vehicle (EV) manufacturer Geely’s Zeekr line.  Check out the sector heatmap on MarketBeat.

Fool me once shame on you, fool me twice shame on me.

Tier 1 customers had built up excess inventory to mitigate any more supply chain disruptions leading to parts shortages that were experienced upon the pandemic re-opening in addition to lower-than-expected production levels for certain OEMs in 2023. As a result, Mobileye expects its Q1 2024 shipments to drop considerably as its customers work through their existing inventory. Normalization should occur during the remainder of 2024 afterward.

Mobileye has an estimated 65% to 70% market share of the ADAS industry with its SoC units installed in over 125 million vehicles worldwide. Get AI-powered insights on MarketBeat.

Narrowed Q4 2023 guidance

On Jan. 4, 2024, Mobileye cut narrowed their Q4 2023 revenue guidance range to $634 million to $638 million, from the previous forecast of $623 million to $648 million, versus $636.28 million consensus analyst estimates.

Lowered Q1 and full-year 2024 guidance

Mobileye expects Q1 2024 revenues to fall by 50% compared to $458 million in Q1 2023. It expects lower-than-expected volumes of EyeQ SoC business. Q1 2024 operating loss is expected in the range of $257 million to $242 million and adjusted operating loss in the range of $80 million to $65 million, after backing out amortization of intangible assets and stock-based compensation.

For Q2 2024 to Q4 2024, revenues are expected to be flat to up mid-single digits. For full-year 2024 revenue guidance was cut to $1.83 billion to $1.96 billion versus $2.53 billion consensus analyst estimates with 31 to 33 million EyeQ units sold compared to 37 million units in 2023. SuperVision shipments are expected between 175,00 to 195,000 units compared to 100,000 units in 2023. Mobileye expects customer inventories to reach normal levels by years end. Its actual Q1 2024 earnings release is expected by the end of January 2024.

Mobileye Global analyst ratings and price targets are at MarketBeat. Mobileye Global peers and competitor stocks can be found with the MarketBeat stock screener.

 

Ascending triangle breakdown to Death Cross

The daily candlestick chart for MBLY had an ascending triangle pattern entering the year. As the distance between the upper flat-top trendline at $44.28 narrowed with its ascending trendline nearing the apex and an inevitable break, MBLY issued its 2024 guidance cut, sending shares down 24%.

The gap fill channel formed between $39.34 and $30.94. This gap down is also causing a potential Death Cross pattern as the daily 50-period moving average at $39.63 starts to cross back down through the 200-period moving average at $39.46. The daily relative strength index (RSI) collapsed through the oversold 30-band to stall at the 21-band. Pullback support levels are at $28.19, $27.41, $26.17 and $24.85.