Improving Auto Supply Chains & Multiple New Product Launches Remain Tailwind For Mobileye: Analyst

Mizuho analyst Vijay Rakesh maintained Mobileye Global Inc MBLY with a Buy and raised the price target from $35 to $40.
Rakesh updated MBLY estimates post the company reported an inline September quarter and guided to an above-consensus December quarter top-line of $536 million, implying revenue growth of 51% Y/Y.
Rakesh believed MBLY saw an upside from its SuperVision platform with ramps at Zeekr in 2022 and potentially Geely Automobile Holdings Ltd GELYF GELYY in 2023E.
Rakesh expected gross margins to decline in 2023E as MBLY ramps lower-margin, much higher ASP, and new Consumer AV (Chauffer).
IHS released its updated C23E LVP estimates of ~85 million, up slightly from the prior November estimate of ~84.5 million, indicating 4% Y/Y growth after the expected 6% Y/Y growth in C22E.
Rakesh was more cautious on 2023E LVP as the analyst saw the U.S. and global consumer weaker against a backdrop of increasing rates, with auto loan rates ranging from 7.5% to 12%+ impacting affordability and leading to dropping lead times, higher dealer incentives, and MSRP premiums dropping.
While 2023 could see Auto headwinds with a stretched consumer, improving Auto supply chains and multiple new product launches for MBLY could remain a tailwind.
Despite macro headwinds, Rakesh saw MBLY well-positioned as the market leader in ADAS solutions.
It has a 70% share and relatively less exposure to potential broader LVP weakness, as key front-camera ADAS take rates at ~50% + continue to grow with improved overall ADAS demand and stricter safety regulations.
Rakesh believes MBLY continues to see a substantial upside as it continues to ramp with Geely's Zeekr unit while also picking up three additional premium design wins at Geely.
The analyst believes MBLY could see 2023-24E volume ramps at Honda Motor Company, Ltd HMC, Bayerische Motoren Werke AG BMWYY, and Toyota Motor Corp TM.
Price Action: MBLY shares traded lower by 3.77% at $33.20 on the last check Friday.
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