Mobileye Stock Weakness Unwarranted, Wells Fargo Says Buy The Stock

Wells Fargo says buy the recent weakness in Mobileye NV MBLY as it maintained its Outperform rating on the stock. However, shares of Mobileye, a provider of advanced driver assistance systems (ADAS), rebounded Thursday and gained more than 4 percent.

The brokerage said the stock would witness additional upside once the “imminent” road experience management (REM) announcement comes from Volkswagen. The potential positive announcement is likely to trigger finalization with several other OEMs in 2017.

“We believe the continued acceleration in ADAS take rates and investment in autonomous capabilities will drive strong top-line and earnings growth for the company over the next few years,” analyst Richard Kwas wrote in a note.

Meanwhile, Kwas noted that the market rumors of possible emergence of NVIDIA Corporation NVDA as a competitive threat doesn’t make sense as Nvidia offers computing power to run Mobileye’s software algorithms. In fact, both Nvidia and Mobileye supply chips to the same Audi platform.

Other upcoming catalysts include Mobileye’s finalization of a memorandum of understanding (MOU) with a global mapmaker and signing of Level 4 agreements with automakers. Mobileye recently announced it has a contract to supply Level 4 autonomous to a "non-traditional" automaker, a sign of validation of company’s technology.

Separately, Trip Chowdhry of Global Equities said Mobileye could collapse by next spring, saying that competition from Autoliv, Nextchip and Continental is going to make new design wins difficult for Mobileye.

Kwas has a valuation range of $51.00 to $53.00 on Mobileye shares, which were up 4.47 percent to $39.25.