Mobileye cut to Neutral at UBS as a return to growth is further out

Investing.com -- Mobileye Global (NASDAQ:MBLY ) was downgraded to Neutral from Buy at UBS on Friday, with a new price target of $14, down from $20.

According to UBS analysts, while Mobileye holds long-term potential as a key partner for non-Chinese automakers, a return to significant growth is now expected to take longer than initially forecasted.

UBS believes that 2025 will be a transition year for the company, with material negative revisions likely needed for consensus revenue forecasts.

The UBS estimate for Mobileye's 2025-27 revenue is about 28% below consensus.

"The stock could tread water until the 'reset' is complete," said UBS, adding that "Intel (NASDAQ:INTC )'s ownership adds another layer of uncertainty."

Furthermore, the UBS downgrade is said to reflect several challenges facing Mobileye, including a delayed growth trajectory for its SuperVision (SV) system, which was a major part of the company's growth story.

UBS explains: "MBLY's growth story relied on the higher ASP L2+ SuperVision (SV) system. MBLY's main customer was Zeekr. However, Zeekr adopted an in-house solution, limiting volumes."

Additionally, UBS raised concerns about other upcoming SV customers, such as FAW and Polestar (NASDAQ:PSNY ), leading the firm to cut its 2025 forecast for SV unit sales by 40% to 71,000 units.

UBS doesn't expect a re-acceleration in SuperVision volumes until 2026, when a Volkswagen (ETR:VOWG_p ) Group contract is expected to boost sales. However, UBS remains cautious, forecasting lower unit sales for 2026 and 2027 compared to consensus estimates.

To change their view, UBS says it would need to see evidence of faster adoption of Mobileye's advanced products, potentially driven by legacy automakers competing with Tesla (NASDAQ:TSLA ) and Chinese OEMs. While there could be positive announcements by year-end, UBS believes these are more likely to come in 2025.

With several uncertainties and delayed growth, UBS prefers to stay on the sidelines for now.

Source: Investing.com