Mobileye Tumbles for Second Week as Short Seller Rattles Bulls

  • Citron Research says shares worth less than $10 long term
  • Mobileye had more than doubled since $1 billion IPO in 2014

Mobileye NV fell for a second week after a report from Citron Research questioning the company’s valuation sparked concern the maker of driverless car software will be unable to fend off competition.

The shares fell 9.9 percent in the five trading days through Sept. 11 after Citron, the firm run by short seller Andrew Left, said in a report that Mobileye shares should be worth $25 in the near term and $10 in the long term. The stock, which has dropped 28 percent from a peak of $64.14 on Aug. 17, closed the week at $46.03 after recovering from a loss of as much as 7.8 percent on Friday.

Mobileye, whose $1 billion initial public offering in 2014 was the biggest out of Israel in U.S. markets, has become a target for short sellers after more than doubling from its IPO price. The company counts Tesla Motors Inc. and General Motors Co. among its customers, and says its chips and software will help make driverless cars a reality as soon as 2021. Citron said its valuation is too high compared to semiconductor companies and is vulnerable to competition after being an early mover in advanced driver assistance systems.

Not Justified

“There is nothing in the past or present financials, business performance or realistic future prospects of Mobileye that would get it within miles of justifying its current $12 billion market cap,” the analysts wrote in the Sept. 9 report.

Bets against the company rose to a record 11 percent of shares outstanding on Sept. 10, according to data compiled by Markit, a London-based research firm. The stock trades at 70 times 12-month future earnings, compared with an average of 19 among auto industry suppliers, Bloomberg data show.

“The Citron report is based on a few simplified conclusions and a lot of hyperbolic claims and extrapolations,” Bruce Schoenfeld, research director at New York-based BlueStar Global Investors, said in an e-mailed response to questions. “Anytime a stock carries very lofty valuations, is momentum-driven by expectations of huge quarter-on-quarter growth, and is almost universally loved by the sell-side, it is vulnerable to such reports.”

Yonah Lloyd, a spokesman for Mobileye, didn’t respond to a request for comment sent after regular business hours in Israel.

Citron analysts correctly predicted a drop in GoPro Inc. shares last November, and have targeted fuel-cell manufacturer Plug Power Inc. and Ambarella Inc., which manufactures high-definition video compression and image processing semiconductors for GoPro and Google.