William Blair Reiterates Outperform On Mobileye N.V. Following Investor Meetings With Management


In a research report published today, William Blair analyst Jason Ader reiterated an Outperform rating on Mobileye N.V. (NYSE:MBLY), after hosting investor meetings with Mobileye management in Chicago this week. No price target was provided.

Ader noted, “Summarizing the discussions, we gained a greater appreciation for the following five points: 1. Potential for revenue acceleration beyond 2016. 2. Trifocal system on schedule. 3. No change to competitive landscape, Mobileye remains way ahead of the pack. 4. ASPs and gross margins to rise gradually over time. 5. Despite selling into the auto industry and packaging its product in a chip, Mobileye’s main intellectual property is its software. As a result, we believe the company should be valued relative to a high-growth software peer group rather than an auto industry peer group.”

The analyst added, “Given Mobileye’s unique combination of hyper-growth and high profitability, we believe P/E-to-growth (PEG) is the most appropriate valuation method; the current PEG ratio on our 2016 estimates is an attractive 1.2 times, versus the peer group PEG median of 1.7 times. Using a slightly different approach, we forecast non-GAAP EPS of $1.34 in 2018. Applying a 50-times P/E multiple on this level of earnings, shares would have about 50% upside over the next three years.”

However, “investor should be aware that on January 28, 2015, 90.1 million shares of MBLY stock will come off the standard 180-day IPO lockup. This could create near-term selling pressure on the stock and thus a unique buying opportunity for long-term investors.”

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 1.3% and a 45.7% success rate. Ader has a -14.1% average return when recommending MBLY, and is ranked #1761 out of 3393 analysts.

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