Analysts Split Over Mobileye

Shares of Mobileye NV (NYSE: MBLY) heavily sold off after its second-quarter print on Thursday only to almost fully recover and close the day just slightly in the red.

Below are briefs from two analyst notes highlighting both the bullish (Citi) and bearish (Pacific Crest) theses.

Citi: Plenty Of Catalysts Still Ahead

Itay Michaeli of Citi commented in a note that, despite the fact shares of Mobileye have already enjoyed a "strong" run, there are ample near- and long-term catalysts to lift shares even further.

Michaeli noted four key catalysts to support shares:

• 1. Automakers continue accelerating investments in automated and autonomous driving.
• 2. Connected cars will likely offer automated driving features throughout the life of a car, rather than just at the point of sale, that hinders Mobileye's penetration.
• 3. A potential large contract with Volkswagen is a "good possibility."
• 4. The company's leadership position in next-gen camera systems, which offer "materially" better fields-of-views and range (the company is currently working on "superhuman perception" capability).

Shares remain Buy rated with a price target raised to $77 from a previous $70.

Related Link: Jim Cramer Advises His Viewers On VMWare, EMC, Mobileye And SolarCity

Pacific Crest: Great Company, Overvalued Stock

Brad Erickson of Pacific Crest commented in a note that Mobileye is "executing well" in an environment that is seeing better-than-expected demand for its active safety products in cars.

However, Erickson argued that while future demand for active safety products is likely to remain "robust," the stock's valuation is applying "little discount" for longer-term risks. The analyst pointed out that the stock is currently trading at a "rich" valuation of 37x 2016 revenue and 79x 2016 EPS.

Erickson also noted skepticism of the magnitude of upward pricing that Mobileye could achieve over time. He explained that there will likely be "some" average selling price uplift as new automatic braking applications are installed in cars; the current valuation "may be giving too much credit" for this contribution, especially when combined with the carmakers' ability to "dilute the feature sets as certain applications increasingly go standard in the future."

Shares remain Sector Weight rated with no assigned price target.

As of 1:13 p.m. EST, Mobileye is trading down 0.74 percent at $58.71.

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