RBC remains cautious on Mobileye stock despite optimism for premium L2+/L3 deals

On Tuesday, RBC Capital maintained its Sector Perform rating on Mobileye N.V. (NASDAQ:MBLY) but increased the stock's price target from $11.00 to $14.00, placing it within the broader analyst target range of $10.00 to $33.00.

The firm's analyst, after attending Mobileye's Investor Day in Munich, Germany, expressed a more optimistic view on the company's prospects in securing deals with premium original equipment manufacturers (OEMs) for its Level 2+ and Level 3 autonomous driving systems.

According to InvestingPro data, eight analysts have recently revised their earnings expectations upward for the upcoming period, suggesting growing confidence in the company's outlook.

The analyst noted Mobileye's impressive driving experience demonstration and highlighted the company's near-term potential, revealing that Mobileye is "2-3 months" away from winning a contract with a Japanese OEM for its Supervised Vision (SV) technology.

This anticipated deal is seen as a significant step for Mobileye in the competitive autonomous driving market. The company maintains a strong financial position with a current ratio of 5.8 and more cash than debt on its balance sheet, providing flexibility to pursue growth opportunities.

Despite the positive demonstration and the potential Japanese OEM deal, RBC Capital has chosen to maintain a cautious stance until a formal award is announced. The analyst suggested that the development of Tesla (NASDAQ:TSLA)'s Full Self-Driving (FSD) capabilities could act as a catalyst in the industry, potentially influencing other OEMs, especially in the United States, to reconsider their in-house efforts for developing Level 2+ and Level 3 systems.

Mobileye, known for its advanced driver-assistance systems (ADAS), has been actively working on expanding its technology to higher levels of autonomy. The company's Investor Day provided an opportunity to showcase its latest advancements and strategic direction to investors and industry stakeholders.

The price target adjustment reflects the firm's recognition of Mobileye's progress and its potential to secure new business, which could enhance the company's market position. While the stock has experienced a significant decline of over 46% in the past six months, InvestingPro analysis indicates the company is currently undervalued.

The Sector Perform rating indicates that RBC Capital is waiting for more definitive evidence of Mobileye's success in expanding its OEM partnerships before altering its investment rating further. For deeper insights into Mobileye's valuation and growth prospects, investors can access comprehensive analysis and 12 additional ProTips through InvestingPro's detailed research reports, part of their coverage of over 1,400 US stocks.

In other recent news, Mobileye has seen a series of analyst updates and company developments. Mizuho (NYSE:MFG) Securities maintained a neutral stance on Mobileye, highlighting a potential new SuperVision contract with a Japanese automaker and a Surround ADAS deal with a European OEM.

However, it expressed caution regarding the 2025 global automotive growth outlook, citing tariff risks posed by the new U.S. administration. Meanwhile, Raymond (NS:RYMD) James holds a $19 target on Mobileye shares, noting that the company has engaged with eight OEMs for its Supervised products and four OEMs for its autonomous driving technology, Eyes Off/No Driver.

RBC Capital maintained its Sector Perform rating on Mobileye, following the company's investor event in Munich, Germany, where it was suggested that Mobileye might be nearing a significant nomination with a Japanese automotive manufacturer. Mobileye also reported changes in board composition, with Mr. Frank D. Yeary resigning from the Audit Committee of Mobileye Global (NASDAQ:MBLY)'s board for the duration of his tenure at Intel (NASDAQ:INTC).

In terms of financials, Mobileye reported mixed third-quarter earnings with an 11% sequential revenue increase from Q2, but an 8% year-over-year decline due to a 9% drop in EyeQ volumes. Various analysts have adjusted their price targets for Mobileye, with Mizuho Securities increasing it to $15.00 while maintaining a neutral stance, and Loop Capital initiating coverage with a Buy rating and an increased price target of $20.00.

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