On Friday, Morgan Stanley adjusted its stance on shares of Mobileye N.V (NASDAQ:MBLY), raising its rating from Underweight to Equalweight, while lowering the price target to $18.00 from the previous $25.00. The adjustment follows a reassessment of the company's prospects amid a recalibration of market expectations and a recognition of Mobileye's strategic value in the autonomous driving sector.
The upgrade was influenced by three main factors, starting with a significant reset of consensus expectations. After a series of profit warnings, analysts now anticipate a substantial decrease in projections for fiscal years 2024 and 2025.
The revision is expected to align more closely with the realities of the highly competitive Level 2+ Advanced Driver Assistance Systems (ADAS) market, which is also experiencing a slowdown in electric vehicle (EV) growth. Morgan Stanley believes that the lowered expectations should mitigate the risk previously highlighted in their April report regarding the SuperVision 'Option Value' in the face of an EV slowdown.
The second factor contributing to the upgrade is the strategic importance of Mobileye's technology, market position, and data. As autonomous systems and embodied AI progress into a new phase of commercialization, Mobileye's differentiated offerings are seen as critically valuable. The firm suggests that investors consider the long-term strategic value of Mobileye's data and technology, despite the challenges in quantifying a definitive 'floor value.'
Lastly, the revised price target reflects a balanced risk-reward scenario. The new target is aligned with Mobileye's current stock price and takes into account the stock's 62% decline year-to-date. The assessment now sees the potential upside and downside of the stock as approximately equal, with a $25 bull case and a $10 bear case scenario.
The analyst also noted that Intel (NASDAQ:INTC), which owns Mobileye, is covered separately by analyst Joe Moore. The update from Morgan Stanley arrives as investors and the market recalibrate their expectations for Mobileye's performance in the evolving landscape of autonomous driving technology.
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