Mobileye Bears Folding as Tighter Grip Seen on Driverless Future

  • Short interest in Mobileye stock has plunged to 10-month low
  • BMW using Mobileye tech to produce driverless car by 2021

A Mobileye system installed on a car.

Photographer: Carlos Osorio/AP Photo

Bearish bets against Mobileye NV are receding after the maker of chips and software for driverless cars said it would team up with BMW AG and Intel Corp. to deliver fully-autonomous cars by 2021.

Traders cut short interest on Mobileye, at one point the world’s most-shorted software stock, to 17 percent of shares outstanding last week, near the lowest level since September. It peaked at 22 percent on June 6. The stock has doubled since hitting a low of $24.54 in February.

Investors say Mobileye’s pact with BMW shows it has gone beyond advanced driver-assistance systems to establish itself as a key partner for automakers as they step up investment in the race to achieve fully-autonomous driving. The stock’s meteoric rise after a $1 billion initial public offering in 2014 made it a target for short sellers like Citron Research, which argued its valuation implied a quasi-monopoly status for what was essentially an early-to-the-game chipmaker with no moat to fend off competition.

“People were worried they’d be a vision player who would get leap-frogged or commoditized,” said Joseph Fath, who helps oversee about $65 billion at T.Rowe Price in Baltimore, including Mobileye shares. “Autonomous capability driving is going to come faster than expected and this is the purest way to play it.”

Jerusalem-based Mobileye has announced partnerships with General Motors Co., Volkswagen AG and Nissan Motor Co. to develop mapping technology that gathers crowd-sourced real-time data from automakers’ fleets of vehicles, something co-founder Amnon Shashua has called the “missing piece” in the march toward driverless cars.

It’s also meant to help automakers fend off competition from Uber Technologies Inc. and Alphabet Inc.’s Google, which has run more than 1.4 million miles of tests on its own driverless prototypes.

Andrew Left, who published the negative report on Mobileye last September, didn’t respond to an e-mailed request for comment.

Mobileye’s products will be more deeply embedded in cars as they come closer to full autonomy, from road-mapping technology to processing sensing by cameras and radars, to the algorithms that dictate driving policy, Shashua wrote in an e-mailed response to questions.

Limited Upside

The BMW partnership was announced a day after a fatal accident in the U.S. involving a Tesla sedan driving on the car’s so-called Autopilot. Tesla uses Mobileye’s technology in its Autopilot, which it started to introduce in October as a step toward autonomous cars. The crash fueled debate over whether self-driving cars are ready for the real world.

While four-fifths of analysts covering Mobileye recommend buying the stock, including Piper Jaffray & Co., which raised its price target to $60 last week, some still warn of competition and see limited upside after the recent rebound. JPMorgan Chase & Co. initiated coverage with a neutral rating and $55 price target last week.

Mobileye has “very strong penetration” and a “content-led growth outlook” but its valuation “seems to largely already reflect these prospects,” the analysts wrote in a July 19 note. The stock has “potential competitive risk and eventual margin pressure that may not be fully reflected.”

At 17 percent, short interest in Mobileye is still the second-highest among 44 global software companies with market values above $5 billion, according to data compiled by Bloomberg.

Mobileye, which reports second-quarter earnings on July 26, rose 3.4 percent last week to $49.60, the highest since Oct. 16.

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