Wall Street is standing behind its call to buy shares of self-driving tech company
Mobileye
after a disappointing quarter that sent the stock tumbling.
Berenberg analyst Jared Maymon on Friday initiated coverage of
Mobileye
(ticker: MBLY) with a Buy rating and a $44 price target.
He said the car business is on the edge of being transformed by improving self-driving car systems enabled by artificial intelligence and machine learning. He sees Mobileye, which develops sensing solutions and software for driver-assistance features on cars, as a leader.
Mobileye stock was up 0.8% in premarket trading at $35.09 a share.
S&P 500
and
Nasdaq Composite
futures were both up about 0.6%.
Shares are still about $8, or 19%, below levels reached before the company’s first-quarter earnings report from April 27, when Mobileye cut full-year financial guidance. It now expects 2023 operating profit of $560 million on sales of just under $2.1 billion. Wall Street had been expecting operating profit of $600 million on sales of $2.2 billion, in line with what the company had forecast in January.
Tesla
(TSLA) price cuts in China were partly to blame. They put pressure on peers to lower prices, which has slowed the rollout of new features that can add costs to cars.
A cut of roughly $40 million to operating profit and $100 million to sales might not seem like it should wipe out some $7 billion in market capitalization, but Mobileye is a highly valued growth stock. Coming into the earnings report, the stock was trading for about 64 times estimated 2023 earnings per share.
Wall Street’s average price target came down to about $45 a share from $47, but no one downgraded the stock. They are more bullish than ever.
Before earnings, 76% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%. With the new Buy rating, now 83% of analysts covering the stock rate shares Buy.
Before earnings there were 16 Buy ratings, with new launches and upgrades after earnings now there are 19.
The company said the revenue slowdown is temporary. Wall Street agrees.
Write to Al Root at allen.root@dowjones.com
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