Morgan Stanley Says Mobileye Could Benefit From $2/Gallon Gas

Ravi Shanker of Morgan Stanley on Wednesday commented that “$2 gasoline brings complexity to the auto industry” and that the cheap gas may also complicate long-term secular trends that are pushing towards tougher fuel efficiency standards.

Shanker notes that nevertheless, the industry still remains committed to long-term fuel efficiency improvements and that auto manufacturers will push for Advanced Driver Assistance Systems (ADAS) to be recognized as a fuel-saving technology.

Shanker adds that Mobileye NV (NYSE: MBLY) may prove to be the largest beneficiary as its camera-based monovision system is cost-effective and provides the ability for users to drive more fuel efficiently through measures like adaptive cruise control.

The analyst adds that there are no other companies that can match Mobileye's projected 50 percent revenue compounded annual growth rate through 2020, 75 percent plus gross margins, revenue/free cash flow conversion of 50 percent plus, forward visibility and defensive moats.

Shares of Mobileye are Overweight rated with a $65 price target.