Mobileye: In Driver’s Seat For Autonomous Driving (NASDAQ:MBLY)

Investment thesis

Mobileye Global Inc. (NASDAQ:MBLY) is one of the key leaders in developing autonomous driving capabilities. Given that it is the market leader in the less-advanced ADAS market, with hundreds of annual model launches, this means Mobileye has a clear path to up-sell its AV products, while also establishing new partnerships for robotaxi. This paves the way for significant revenue expansion over time, as proved by Mobileye’s CES updates.

Mobileye CES updates

Mobileye held its annual CES keynote. There were various pieces of news.

Financial updates

Mobileye said it has a $17B ADAS pipeline through 2030, of which $6.7B was added in 2022 for 63.6 million systems. Obviously, if Mobileye could add such an amount every year, then this suggests revenue could at least quadruple.

Besides remaining the definite leader in ADAS, one of the ways in which Mobileye is seeking to increase revenue is by upgrading from providing $50 ADAS solutions, to full-stack consumer autonomous driving. Indeed, doing the math, the average content per car for the deals in 2022 is over $100, more than double of Mobileye’s historical ASP (average selling price). During the keynote, Amnon Shashua suggested products like SuperVision have a two orders of magnitude higher ASP. Although there is likely some rounding involved, since Mobileye is providing a full board instead of just a chip, the price may well be around four digits.

To that end, Mobileye Global Inc. started ramping its first hands-off product last year, called SuperVision, with Geely. Remarkably, of the $6.7B pipeline that was added, Mobileye signed $3.5B (half the 2022 deal value) worth of SuperVision business, proving that up-sell is providing significant revenue expansion. In a slide from the keynote, Mobileye showed how SuperVision revenue is expected to reach the 1.2 million unit mark in 2026, indicating how a small portion of overall volume may contribute a major fraction revenue over time.

As a reminder, SuperVision basically leverages the camera-based subsystem of Mobileye’s True Redundancy (camera + lidar + radar) autonomous driving stack. In that regard, it is a complete equivalent of, or competitor to, Tesla’s (TSLA) Full Self-Driving (“FSD”) package.

Besides these ADAS products, Mobileye is also making steady progress to monetize its robotaxi Drive product. Unfortunately, though, despite the Moovit acquisition in 2020, Mobileye clarified it does not intend to become a robotaxi operator itself (nor will it sell such vehicles). Nevertheless, Mobileye announced $3.5B in expected revenue through 2028 from its Autonomous Mobility-as-a-Service products, from three deals. Mobileye also announced line of sight for signing a $1.5B program through 2030 for its Chauffeur product for consumer AV.

MaaS (robotaxi)

Mobileye announced a MOU for several thousand units with one partner.

In addition, Mobileye has finally received the permit for piloting its Drive robotaxi in Germany, ramping in 2023, although fully driverless operation will require further approvals.

Further, Holon revealed a new autonomous people mover. It can carry 15 people, targeted for the end of 2025 in the U.S, to be followed by international expansion. Mobileye says it has many such collaborations.

ADAS

In 2022, 233 ADAS models launched. Mobileye also continued to work on its in-house radar and lidar sensors, and announced that it is collaborating with Winstrom NeWeb for the imaging radar in 2025.

Discussion

Although the timeline for robotaxi (and perhaps consumer AV) seems to have shifted a little bit further than originally expected (early 2022 robotaxi, 2024/25 consumer AV), progress remains steady with a clear go-to-market strategy to generate revenue and profits. This is proved by the financial figures quoted above. A line of sight of billions of AV revenue surely makes Mobileye one of the top contenders in this space.

Overall, this is a confirmation of the Mobileye thesis all the way back to the late 2019 Investor Summit (which in hindsight foreshadowed the IPO): Mobileye has a comprehensive product portfolio, allowing it to generate revenue at all points from ADAS to AV to robotaxi, at a global scale.

The only “new” business information was a confirmation Mobileye will not operate its own robotaxi network, which the 2020 Intel (INTC) Moovit acquisition at the time signaled (as Mobileye said back then, this would extend its AV stack all the way to the operating/service layer).

Stock

The stock has performed relatively well given the overall market, currently sporting a respectable $26B market cap despite not yet crossing $2B in annual revenue run rate.

Even though it is still well below the $50B market cap originally rumored as Intel’s IPO target, at well over 10x sales Mobileye Global Inc. stock is clearly expensive.

Nevertheless, very long-term investors should have little doubt that Mobileye could eventually grow into and even outgrow its current valuation, given the generational opportunity. For example, although unlikely and just hypothetical, if every vehicle Mobileye sold in 2022 would have been a L2+ SuperVision one, its reported revenue would likely be 10-50x higher. This signals a very long runway for growth.

Investor takeaway

In the Gartner hype cycle, clearly the hype for autonomous driving has cooled down, but as Mobileye said in its CES keynote, autonomous driving is closer to a few years than a few decades away. The technology is mostly ready, as indicated by the AV pilots starting in Germany (although a year beyond the original Israel projection, but this seems to be due to lack of permits). It was also validated by the financial disclosures, with both robotaxi and consumer AV-related projected revenue in the multi-billion dollar range.

For investors, although predicting the stock price (trend) is difficult, unfortunately the current Mobileye Global Inc. price is very high, especially given the current macro environment. This makes the stock only compelling for decade-long or longer holders.