Mobileye Gains as Morgan Stanley Predicts Shares May Double

Sep 03, 2014 4:56 pm ET

(Updates with closing price in second paragraph.)

Sept. 3 (Bloomberg) -- Mobileye NV, a maker of driver assistance systems, climbed to a new high since going public last month after Morgan Stanley said the company’s “powerful” growth may lead the shares to double.

Mobileye jumped 9.2 percent to $46.97 at 4 p.m. in New York, after gaining as much as 15 percent in intraday trading. That’s the third-biggest increase on a closing basis since Aug. 1, when the stock surged 48 percent on its first day of trading.

The shares could reach $100 under the most optimistic scenario, according to Morgan Stanley’s Ravi Shanker, reiterating a similar prediction from a week ago. The New York- based bank was among those that led Jerusalem-based Mobileye’s IPO. While Shanker has an overweight rating on the stock, the equivalent of buy, his share-price target is $46 for the next 12 to 18 months.

“The path to $100 does not involve heroic assumptions,” Shanker wrote in the report dated today. “If MBLY can hold its own and just retain its current position, let alone make further inroads from here, the stock is likely to be closer to our $100 bull case.”

To reach this level, Mobileye needs to hold its current pricing and profitability, keep market share close to 80 percent and see quicker-than-expected adoption of autonomous driving programs in China, Shanker wrote.

Earnings Report

Some investors may be buying the stock ahead of the company’s earnings report tomorrow, according to Jason Ader, an analyst at William Blair & Co. Mobileye earned 5 cents a share in the three months ended June, according to the average of eight analyst estimates compiled by Bloomberg. On an annual basis, the company is forecast to double its profit by next year.

“It’s a pretty unique story with high growth and high profitability that distinguishes it from most of the tech companies you see that are growing 60 to 100 percent and losing money,” Ader said via phone from Boston. “It’s clearly a momentum stock right now, it’s a darling.”

Mobileye’s image-sensing technology stands apart from competitors because it uses a single camera to capture and display a vehicle’s surroundings, according to Ader. Other vision-based driver assistance software that employ radar or dual-camera systems have difficulty capturing stationary or far- away objects, he said.

Yonah Lloyd, chief communications officer at Mobileye, did not immediately respond to an e-mail sent after working hours in Israel.

--With assistance from Libby Sallaberry McGowan and Gabrielle Coppola in New York.