Citigroup Hikes Mobileye Price Target To $70 After Meeting Management

In a report published Thursday, Citigroup analyst Itay Michaeli detailed his recent meeting with Mobileye NV (NYSE: MBLY)'s senior management team including Ofer Maharshak, Sr. VP and CFO, and Yonah Lloyd, Chief Communications Officer and Sr. VP Business Development.

Michaeli stated that he walked away with "added long-term conviction" following the meeting with management. As such, the analyst reiterated a Buy rating with a price target raised to $70 from a previous $62.

2020+ Market Share Established Today

Michaeli stated that Mobileye is sourcing programs for the 2017 to 2018 timeframe. Typically speaking, auto contracts last five to seven years, therefore contract wins in that time frame will establish market share for 2020 and beyond. The analyst noted that he previously modeled gradual share loss in 2020 (65 percent market share) and 2025 (56 percent market share) but after meeting with management, this assumption is now being revisited.

"To be clear, we haven't raised our market share estimates but now see potential for them to start appearing somewhat conservative over the next one to two years as further bookings occur," Michaeli wrote. "Timing new customer wins is always difficult but we still believe that winning with Volkswagen remains a pretty good possibility for Mobileye."

Dominant Position In Automated Driving

Michaeli said Mobileye has established a dominant lead in tri-focal as it has previously mono as 13 auto manufactures are working on autonomous features compared to eight during Mobileye's IPO. Management also confirmed that future enhancements in camera resolution could also tri-focal to be folded-down into a bifocal hardware.

"We believe this could be significant long-term in further establishing the camera as the lowest-cost/richest-input sensor," Michaeli wrote. "As cars also become connected, automakers could be enticed to adopt a multi-focal solution in order to have superior safety and convenience applications to offer as standard equipment and option subscriptions."

Michaeli stated that this scenario could allow Mobileye to charge higher average selling prices for its products and enter a "win-win" scenario for automaker profitability.