Mobileye Global Inc., (NASDAQ:MBLY), faces an important moment in its earnings report for Q2, which is scheduled to be released tomorrow.
J.P. Morgan has downgraded its stock, adding to the pressures already facing the company. Its stock price had dropped 54% year-to date.
Analyst Samik Chatterjee reduced Mobileye’s ratings from Overweight (High) to Neutral (Low), and the target price from $38 to $24.
The downgrade comes at a moment when the auto industry is grappling with a deteriorating outlook in volume for electric vehicles. This has been further impacted due to the poor sales trends of ICEs and hybrids.
Chatterjee thinks that rising interest rates and high vehicle prices could affect the outlook of Mobileye’s Advanced Driver Assistance Systems business in the short-term.
Mobileye is also at risk from an increase in inventory among companies that are directly involved with the automotive sector.
Morgan Stanley downgraded Mobileye in April of this year due to a surprising slowdown in EVs.
Adam Jonas, an analyst at a leading research firm in the field of computer vision noted that Mobileye is a leader and has created value. However, its unexpected growth slowdown poses a major barrier.
Jonas lowered Mobileye’s score to Equal Weight from Underweight and reduced the target price to $25, down from $26.
The move is a reflection of concerns about Mobileye’s valuation. At 36 times the FY26 PE it appeared to be fully valued, despite downward pressures in consensus expectations.
Earnings for Q2 – A preview
Analysts expect a difficult report for Q2 with a GAAP profit of $0.14 on revenues of $423.55 millions.
The forecast is a stark contrast to the Q2 results of last year, when there was a lower loss per share of $0.05 on heftier revenues of $454 millions.
Mobileye, despite these challenges, continues to be a leader in the ADAS/autonomous driving space.
The REM (Road Experience Management), and RSS (Responsibility Sensitive Safety), systems of the company demonstrate its commitment to improving safety and efficiency for autonomous navigation.
Mobileye’s True Redundancy strategy ensures that the environmental sensing technology is resilient against system failures.
Mobileye has experienced financial volatility throughout its journey. Mobileye’s Q1 revenue for 2024 was down 48% compared to the previous year, while its gross margin dropped from 45.2% (previously) to 22,6%. This is due in part, because of inventory and pricing issues.
It’s important to take into account how fundamental factors could affect Mobileye stock’s trajectory as we move towards the technical analysis portion of our discussion.
We’ll dive into the data and charts to see what they tell us about Mobileye’s stock market future.
Bulls and bears both must be cautious
Mobileye stock soared after its IPO, which took place in 2022. It then remained largely rangebound for a whole year within a range of $32 to $48.
After the company announced weak guidance for the Q4 of 2018 and the year 2023, however, the share price dropped dramatically at the beginning of 2024. It has been in a downward trend ever since.
TradingView
Bears should remain vigilant, as the stock has dropped from levels of $33 to $20 within a little over a week and it appears that a rebound is imminent.
It remains to be determined whether this bounce-back will lead to a stronger market and a higher climb or if it will be used to short the stock.
Investors who have a bullish view on the stock should also avoid taking long positions unless it shows signs of stability.
They should still start small and only add more if it rises over its $33.2 medium-term support.
The stock will continue to fall if J.P. Morgan continues its downgrade of Mobileye Global before Q2 earnings. This post may change as new information is revealed.
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