Investors Buying Mobileye Shares Following Goldman's Upgrade To Buy

Mobileye NV (NYSE: MBLY) has seen a decline in its two-year forward P/E from c.60x to 25x, despite expectations of the company’s EPS growing at a Compound Annual Growth Rate of 40 percent during 2016–2021.

Goldman Sachs’ Alexander Duval upgraded the rating on the company from Neutral to Buy, while raising the price target from $40 to $50.

Wins To Continue

Duval mentioned that Mobileye won 100 percent of the advanced driver assistance systems request for quotations for which the company competed in 2016, with robust visibility into 2018–2026.

The analyst also stated that the company was “well placed for opportunities in L3/L4 autonomous driving, given 10 production deals, including those with BMW, Audi and Nissan.”

In addition, Mobileye’s crowd sourced mapping solution is expected to enhance product “stickiness” and be a “key enabler” for full autonomy.

Duval expects the stock to be re-rated, driven by the company’s earnings momentum and potential for further wins in the fully autonomous driving category.

Future Prospects

The analyst also believes that given that Mobileye has recently signed a deal to provide its Road Experience Management (REM) mapping data to mapmaker HERE, there is “an increased likelihood that the former will sign REM deals with car makers, which could also catalyze stock outperformance.”

The EBITDA estimates for 2017 and 2018 have been raised by 4 percent each and are now ahead of the consensus expectations.

At last check, shares of Mobileye were up 3.74 percent at $43.57.

Image Credit: By U.S. Embassy Tel Aviv (Ambassador's visit to Mobileye) [CC BY 2.0], via Wikimedia Commons