Most Loved and Derided Tech Stock Caught in Driverless War

  • Mobileye is heavily shorted, but analysts see 80% return
  • CTO: New mapping service gives carmakers 'seat at the table'

For investors trying to divine the path to a driverless future, Mobileye NV has become a battleground.

The Jerusalem-based maker of software for driverless cars went public in a $1 billion offering in July 2014, the largest in Israeli history. Wall Street analysts backed the stock, which more than doubled to peak at $64.14 percent a year later, giving Mobileye a market capitalization of nearly $14 billion. Then came the short sellers.

Bearish investors argue Mobileye’s valuation doesn’t account for competition that will inevitably emerge. Alphabet Inc., the holding company that owns Google, plans to make its autonomous car unit a standalone company this year, and Nvidia Corp. unveiled new chips with artificial-intelligence features at the Consumer Electronics Show in Las Vegas last week.

That’s helped make Mobileye the most shorted stock among 44 global software companies with market values of more than $5 billion. It’s also the one most prized by analysts -- their consensus target price is almost 80 percent more than Mobileye’s current stock price, the group’s best potential return. The shares fell 1.3 percent to $37.25 at 10:47 a.m. in New York.

At least 25 auto manufacturers have endorsed Mobileye’s technology and it continues to “perpetuate the highest market share in the industry,” Deutsche Bank AG analyst Rod Lache noted in a Dec. 16 report.

Chipmakers Qualcomm Inc., Intel Corp. and Texas Instruments Inc. are among those targeting cars as growth areas.

“Investing in this company is a ‘Hail-Mary bet,’” Citron Research, a short-selling firm, said in a Sept. 9 report. “There are no barriers to entry for competitors other than legitimate R&D, and they do not have superior technology. They just got there first.”

For Amnon Shashua, Mobileye’s chairman and chief technology officer, the path to success is clear: mapping data. He unveiled partnerships with General Motors Co. and Volkswagen AG last week to develop a new mapping technology that gathers crowd-sourced real-time data from the automakers’ fleet of vehicles.

The continuously updated road map is the “missing piece” in the race to achieve fully autonomous driving, Shashua said in a Jan. 11 interview in New York. It’s also an added revenue stream for Mobileye once the technology is ready in 2018, he said.

Google, BMW

“We’re still going to sell chips, but in addition, we’re going to provide mapping services,” Shashua said. This “not only solidifies our position, but it opens a new market.”

It’s also automakers’ best hope to avoid being cut out by Google in the coming revolution towards shared mobility -- a day when individuals don’t buy their own cars, but use apps to hail rides in driverless ones, Shashua said. Google’s biggest asset in the race for a driverless future is its mapping data, he said. Apple Inc. has its own maps offering, and German carmakers Bayerische Motoren Werke AG, Audi AG, and Daimler AG bought Nokia’s digital-map unit for $3.1 billion last year to give them maps for cars.

With Mobileye’s software, automakers can produce their own mapping data and gain “a seat at the table,” he said.

Google hopes to form partnerships with many automakers and suppliers as it develops self-driving cars, the head of its vehicle project said Tuesday.

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