If there was any joy among automotive technology investors to kick off 2024, Mobileye Global (NASDAQ: MBLY) quickly kicked that to the curb. The company, which is nearly 90% owned by parent Intel (NASDAQ: INTC), is still finalizing its financial results for last year. There seem to be no issues for 2023. But the early outlook for 2024 was a zinger.
After a couple years of stellar growth -- driven by higher demand for self-driving car tech and advanced driver assist systems (ADAS), as well as automakers' desire to increase electronics inventory after the disastrous chip shortage of 2021 and 2022 -- Mobileye's run higher has come to an end. The question now is how long the downturn will last. Here's what you need to know about investing in Mobileye in 2024.
A massive plunge to begin a new year
For the end of 2023, Mobileye tightened up its previous guidance and actually expects a healthy year-over-year growth rate of about 12.5% in both revenue and adjusted operating income. Not bad. Clearly the company continues to win with its lineup of processors geared toward vehicle autonomy and ADAS (lane change assist, collision avoidance, adaptive cruise control, parking visualization and assist, etc.).
Mobileye Financial Metric
Q4 2023 Outlook
YoY % Increase
Revenue
$634 million to $638 million
~12.5%
Adjusted operating income
$241 million to $247 million
~12.5%
Data source: Mobileye Global.
However, after reiterating guidance for the final months of 2023, management issued a dismal outlook for 2024, and the stock plunged some 25%.
Mobileye Financial Metric
Q1 2024 Outlook
YoY % Increase (Decrease)
Revenue
$229 million
(50%)
Adjusted operating income (loss)
($80 million) to ($65 million)
Compared to $124 million income in Q1 2023
Data source: Mobileye Global.
Much like what happened with the PC and smartphone market starting in late 2022, Mobileye's problem is twofold. First, though automotive technology (constructing literal "data centers-on-wheels") is a secular growth trend, demand for chips has slowed. Chalk that up to a myriad of factors, including higher interest rates the last couple of years that have gradually eroded consumers' ability to purchase more expensive vehicles.
Second, as consumer demand has trailed off, global semiconductor manufacturing supply chains have improved.
The end result? Mobileye said it has become aware of about 6 million to 7 million excess units of its EyeQ chip systems. It will ship fewer new EyeQ systems in Q1 to help its automotive customers burn off this excess inventory, and expects a gradual recovery of sales to commence going forward.
But overall, 2024 could be rough for Mobileye. It expects to ship around 31 million to 33 million EyeQ units, compared to about 37 million shipped in 2023.
Full-year 2024 revenue is forecasted to be $1.83 billion to $1.96 billion, implying about a -8.5% reduction in revenue compared to 2023. Additionally, adjusted operating income of about $690 million in full-year 2023 will fall to adjusted operating income of just $270 million to $360 million in 2024.
Is Mobileye stock a buy-the-dip candidate?
It looks bad right now, but the digitalization of cars isn't going away. Mobileye's downturn could be short-lived.
For example, the reason EyeQ unit sales are so high (about 37 million last year, versus an expected 80 million to 90 million total vehicles sold worldwide) is because of pre-production vehicle testing and use of EyeQ units. Additionally, some higher-end models utilize multiple EyeQ chip systems per car. As more automakers cram more driver-assist features into their models, EyeQ chip system sales could continue to rise.
With the stock finally falling, it seems my patience over the last year-plus since Mobileye's re-IPO (a way Intel raised cash for its chip manufacturing aspirations) has been rewarded. Mobileye's financial recovery is going to take longer than 2024. It may not reach previous revenue and profit peaks until 2025.
That said, investors looking for a way to bet on the continual advance of smarter vehicles might want to start buying Mobileye sooner rather than later. As soon as the market sniffs out a resumption of sequential growth for the company after its Q1 2024 plummet, the stock might actually begin rallying long before Mobileye gets back to all-time-high financials of 2023. That's how semiconductor stocks tend to behave.
Thus, I'm ranking Mobileye as a cautious buy to kick off 2024, perhaps utilizing a dollar-cost average strategy to spread out risk for what could be a wild year for the self-driving car technologist stock.
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Nicholas Rossolillo and his clients have no position in any of the stocks mentioned. The Motley Fool recommends Intel and Mobileye Global and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
