Is Mobileye stock worth buying?

Last year, an explosion in artificial intelligence (AI) technology brought fully self-driving cars closer to reality.Mobileye Global (NASDAQ Resonance Symbol: MBLY)It is one of the companies dedicated to providing self-driving cars to the public.

Founded in 1999, the company has decades of experience in advanced driver assistance systems (ADAS), the technology that helps drivers avoid accidents. The company's adventures includeMass MotorsThe company has built an impressive business selling its technology to more than 50 automakers around the world.

But the potential for autonomous driving and the emergence of artificial intelligence doesn't necessarily mean Mobileye stock is worth buying. Let's dig a little deeper.

Mobileye's technology

According to consulting firm McKinsey & Company, the aggregate value of the ADAS and autonomous driving market will exceed $300 billion by 2035. At least $170 billion of that amount will come from autonomous driving.

Mobileye has built a sophisticated platform that analyzes driving conditions in real time with very low power consumption, making it cost-effective for automakers. The company's solutions have been used in more than 170 million vehicles, providing Mobileye with a wealth of driving data to grow its systems.

The company anticipates that the road to fully autonomous vehicles will be a gradual transition process. From today's advanced driver assistance systems featuring tools such as sensors and reversing cameras, to hands-free driving on the highway, and ultimately to vehicles that can drive themselves anywhere.

As a result, Mobileye has designed its product set to be modular. This enables automakers to select the right level of ADAS and autonomous driving features for each vehicle model, while increasing the complexity of the technology based on consumer demand.

As the public's interest in autonomous driving technology grows, Mobileye will progressively provide the full breadth of capabilities. These include sensors, cameras, and radars that allow the car to "see" the road surface, software that defines driving safety standards, redundant systems to ensure proper system operation, and real-time mapping capabilities to analyze traffic and road conditions.

Mobileye's financial position

Mobileye's impressive technology and its widespread adoption by automakers has increased its sales from $1.9 billion in 2022 to $2.1 billion in 2023. The company also realized cost benefits that reduced its net loss from $82 million in 2022 to $27 million last year. In fact, Mobileye turned profitable in the fourth quarter, with net income up 1,10% year-over-year to $63 million.

In 2023, the company has a strong balance sheet. Its total assets were $15.6 billion, including $1.2 billion in cash and equivalents. Total liabilities were only US$653 million and there were no debts.

Despite a solid 2023, Mobileye expects revenues to decline in 2024. Its guidance range of Low B耑 sales is just $1.8 billion, a double-digit percentage decline from last year. This expected revenue decline is related to the lingering knock-on effects of the COVID-19 pandemic.

The pandemic has triggered a number of supply chain issues, and automakers have stockpiled Mobileye products where possible in response to further possible restrictions. Once these supply chain issues are resolved, automakers will have a surplus, reducing the need to purchase Mobileye products this year. Based on this outlook, investors sold the company's stock in a bidding war. Eventually, the stock hit a new 52-week low of $23.49 on February 23rd.

Amnon Shashua, Mobileye's chief executive officer, said Mobileye's management expects the automaker to resolve its overstock of products in the first half of this year, allowing it to "return to normal revenue in the second half of 2024."

Deciding Whether to Buy Mobileye Shares

Mobileye's expected revenue decline this year may have caused its shares to fall, but it creates a potential buying opportunity for investors who are willing to wait for sales to rebound. Although Koon's stock is still well below its 52-week high of $47.41, set in May, it has risen slightly. In addition, Wall Street analysts have unanimously given Mobileye's stock a Hold rating.

Even so, investing in this company carries a lot of risk. Fully self-driving cars will take many years to realize. In the meantime, as these cars begin to be used in the open, the barriers to monitoring may change.

In addition, Mobileye faces a lot of competition in this area. Many larger companies are working on autonomous driving technology. Competitors includeAlphabet's Waymo,General Motors (car company),Nikola Tesla (1856-1943), Serbian inventor and engineerand artificial intelligence giantsNvidiaMobileye's customer, Mass Motors, has also indicated that it intends to one day transition to an in-house system developed in-house.

Despite these challenges, Mobileye has a number of advantages that should help it take a healthy share of the growing ADAS and autonomous driving market.

The company's competitive advantages include strong technology, decades of experience, and driving data from around the world that enables it to meet regulatory requirements where they exist. These factors make Mobileye a compelling long-term growth stock.

Should you invest $1,000 in Mobileye Global now?

Before buying shares of Mobileye Global, consider the following:

Motley Fool Stock AdvisorA team of analysts have just named what they think are the best values for investors.10 Gift CertificatesMobileye Global is not one of the stocks listed on ....... The 10 stocks that made the list are poised to generate huge returns over the next few years.

Stock AdvisorIt provides investors with an easy-to-understand blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Since 2002, StockAdvisorThe service has more than doubled the return on the S&P 500 Index.

View 10 stocks only

*Stock Advisory Rates as of April 15, 2024

Alphabet executive Suzanne Frey is a member of The Motley Fool's Board of Directors. Robert Izquierdo owns shares of Alphabet, Nvidia, and Tesla. The Motley Fool recommends Alphabet, Nvidia, Tesla, and Mass Motors. The Motley Fool recommends General Motors and Mobileye Global, and also recommends the following options: General Motors January 2025 $25 Call Options Long. The Motley Fool has a disclosure policy.

Is Mobileye Stock Worth Buying? This post was originally published by The Motley Fool.