William Blair Initiates Coverage On Mobileye N.V. With An Outperform Rating

In a research note published today, William Blair analyst Jason Ader initiated a coverage on Mobileye N.V. (NYSE: MBLY) with an Outperform rating. No price target was assigned.

The following bullets contain some highlights from Ader’s initiation note:

  • Mobileye is the world leader in camera-based advanced driver assistance systems (ADASs), a set of safety technologies that enable vehicles to visually process the environment around them and alert drivers or take over certain functions of the car to prevent accidents. Key features of ADASs include forward collision warning (FCW), lane-departure warning (LDW), automatic electronic braking (AEB), adaptive cruise control, intelligent high-beam control, and trafic sign recognition. Catalyzed by increasing government safety regulations and consumer awareness, as well as declining costs, ADAS technology is in the early stages of global standardization in vehicles and is the irst step toward the development of the much larger market of autonomous vehicles that partly or fully drive themselves.
  • We view Mobileye’s business model as uniquely scalable and proit-able, offering high visibility and operating leverage, leading to net margins that are best-in-class. Last but not least, we have a high degree of conidence in Mobileye’s management team, which has built the business from the ground up, continues to maintain large stock ownership, and understands what it takes to sustain technological leadership in the fast-developing ADAS market.
  • We expect the ADAS market to be one of the fastest-growing segments within the larger automotive electronics market through 2020. Market research irm Strategy Analytics forecasts ADAS market growth of 22% from 2012 to 2017, with spending on ADAS by automakers reaching $22 billion by 2020 (up from about $8 billion in 2013).
  • We believe that the company’s dominant position in the ADAS market, with an 80% win rate in camera-based requests for quotations, is based on four main factors: 1. Its unique monocular (single-camera) technology approach to delivering ADAS features, which we believe offers the best combination of reliability and cost. Mobileye’s primary competitors to date, including Bosch, Continental, and Autoliv, use stereo camera technology and/or radar to provide ADAS functions, each of which has deiciencies compared with Mobileye’s monocular design. 2. Its record of innovation and reliability, including a 15-year history of developing technologies for this market and an unmatched validation data set with more than 7 million kilometers of road experience across over 40 countries. 3. All ADAS applications in one system, which is a core advantage of Mobileye’s system-on-a-chip and single-camera approach. This results in signiicant cost savings and convenience for the OEM, since alternative sensor technologies such as radar can be removed or deemphasized and new safety applications can be added via a simple software update. 4. The business decision to go to market as a tier-2 supplier selling into established tier-1 auto suppliers. This has enabled Mobileye to position itself as a partner rather than competitor to many tier-1 vendors, expanding its market share opportunity.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jason Ader has a total average return of 7.1% and a 60.5% success rate. Ader is ranked #885 out of 3261 analysts.

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