Hook & thesis
Mobileye (MBLY) is a rare combination: a fast-growing, product-led AI company that still looks attractively priced. The market has punished the stock from its 2025 peaks, yet underlying business signals are improving. Recent quarterly revenue is accelerating, operating cash flow is positive and the balance sheet is enormous relative to liabilities. At roughly $10.7 a share the stock trades at an implied market cap of about $8.7 billion — below reported shareholders' equity — creating a compelling asymmetric risk/reward for the long side.
My tactical trade: initiate a position around $10.50-11.00 with a tight size relative to portfolio — Mobileye is a high-growth tech name with execution and M&A risk. Targets are set for near-term and multi-quarter upside; stop is designed to limit downside if the market re-prices growth expectations further.
What Mobileye does and why the market should care
Mobileye builds ADAS and autonomous driving technology - a suite that spans camera-based Driver Assist, Cloud-Enhanced Driver Assist, the Mobileye SuperVision family (Lite to full), Mobileye Chauffeur and a complete Self-Driving System. The company's intellectual property and stack (software + chip + mapping + vision) are core inputs for automakers migrating from basic driver assistance to increasingly automated driving features.
Why that matters: OEMs are moving from optional ADAS features to standard safety stacks and, longer-term, to chauffeured, hands-free driving in specific geofenced scenarios. Mobileye's edge is breadth of software, production-proven camera solutions and heavy OEM adoption. That puts revenue growth and margin expansion in front of the company as its software monetization and higher-value products ramp.
Recent financials - concrete numbers
Use the most recent quarterly filings as the lens:
- Q2 FY2025 (period ended 06/28/2025): revenues $506.0M; gross profit $252.0M; operating loss $74.0M; net loss attributable to parent $67.0M; R&D $282.0M. Net cash flow from operating activities was positive $213.0M.
- Q1 FY2025 (period ended 03/29/2025): revenues $438.0M; gross profit $207.0M; operating loss $117.0M; net loss $102.0M; R&D $275.0M. Operating cash flow was $109.0M.
- Q3 & Q4 FY2024 (most recent full prior quarters): revenues $486.0M (Q3) and $490.0M (Q4), indicating a roughly $1.92B LTM revenue run-rate when combined with the two FY2025 quarters above.
- Balance sheet (Q2 FY2025): total assets ~$12.578B; liabilities ~$512M; equity attributable to parent ~$12.066B. Inventory stood at $325M and current assets were ~$2.397B.
Put into context: the business is generating steady operating cash (Q2 FY2025: $213M). Revenues are trending up sequentially (Q1 to Q2 growth from $438M to $506M), R&D remains elevated as the company doubles down on product development and software features, and the balance sheet shows low liabilities relative to assets and equity.
Valuation framing
Market price context: the latest trade prints around $10.71 per share. The company reports a diluted average share count of ~812 million (Q2 FY2025), implying an equity valuation near $8.7B (10.71 * 812M ≈ $8.7B).
Key valuation ratios (approximate, using public filings):
- Implied market cap: ~$8.7B (based on diluted shares of ~812M and price ~ $10.7).
- LTM revenues: ~ $1.92B (sum of four most recent quarters), implying Price-to-Sales ≈ 4.5x.
- Book value / shareholders' equity (Q2 FY2025): ~$12.07B. The stock is trading at ~0.72x book (8.7 / 12.07), i.e., below reported equity.
Interpretation: trading below book for a growth/tech company with recurring software components is unusual and suggests the market is either penalizing near-term profitability and heavy R&D or pricing in execution/competitive risk. On a cash-flow basis, Mobileye generates sizable operating cash; the company converted that into positive operating cash flow ($213M in Q2). That provides optionality to fund R&D, M&A or buybacks if management chooses.
Comparative note: direct public peers with matching software + OEM scale are thin in public markets (nearby auto-tech players vary widely by business model). On a qualitative basis, Mobileye's P/S is sensible given high single-digit/low double-digit revenue growth and software monetization tailwinds; its below-book trading is a provocative signal of potential mispricing.
Catalysts (what can move the stock higher)
- OEM wins & production ramps: incremental deals or volume ramps for Mobileye SuperVision / Chauffeur would push revenue mix toward higher-margin software and drive leverage.
- Monetization upgrades: recurring cloud / mapping / subscription revenue growth from enhanced cloud features and driver-assist services.
- Integration & upside from Mentee Robotics acquisition (announced 01/07/2026) - expanding "physical AI" exposure and potential new revenue lines outside pure automotive could re-rate multiple if accretive.
- Margin expansion as cost of revenue stabilizes and higher-value software scales, turning operating losses to operating leverage over several quarters.
- Positive macro/cyclical tailwind in auto production that boosts camera/ECU content per vehicle.
Actionable trade plan (entry / stop / targets)
My base-case trade (position-sized):
- Entry: $10.50 - $11.00. If you missed the band, use a disciplined scale-in up to $12.00 but prefer the lower entry.
- Initial stop: $9.00 (roughly 15-20% below entry). I pick $9.00 because it protects capital while recognizing volatility in tech names tied to news cycles.
- Targets (tiered):
- Target 1 (near-term / 1-3 months): $13.50 — about +25% from the top end of entry band; reasonable if improved guidance or OEM announcements arrive.
- Target 2 (multi-quarter / 3-9 months): $17.50 — ~+60% from entry; reflects partial re-rating toward mid-teens P/S for accelerating software monetization and margin expansion.
- Target 3 (bull case / 12+ months): $22.50 — ~+100%+, achievable if Mobileye proves hands-free tech at scale, integrates Mentee robotics effectively and posts meaningful operating leverage.
Position sizing: given execution and integration risk, keep any single trade allocation modest relative to invested capital (example: 1-3% of portfolio) unless you actively monitor catalysts and are prepared to tighten stops or scale out.
Risks & counterarguments
At least four principal risks to this thesis:
- Execution & integration risk - heavy R&D and the recent Mentee Robotics acquisition (announced 01/07/2026) increase complexity. Failure to integrate or to commercialize physical-robotics synergies would destroy value and maintain investor skepticism.
- Competition - larger players (chip vendors, other vision stacks, lidar + fusion players or vertically integrated EV OEMs) could undercut pricing or win exclusive OEM partnerships. Competition could slow Mobileye's feature adoption or push down ASPs.
- Profitability / high R&D burn - the company posts operating losses in periods as it invests (Q2 FY2025 operating loss $74M; R&D $282M). If top-line growth stalls, the market will re-rate the stock lower quickly.
- Regulatory / safety setbacks - any large-scale safety incident tied to ADAS features, recalls or tighter regulation on automated driving would materially impact growth and sentiment.
- Auto supply cycle exposure - auto production shifts and chip supply issues still can bite growth even for software-first players; cyclical OEM demand could dent near-term revenue.
Counterargument (what the bears will say):
Critics argue that the stock's low price reflects realistic concerns: Mobileye still loses money on the operating line in many quarters when R&D is high, and the ADAS/autonomy market is crowded — value could be capped as OEMs hedge by multi-sourcing or developing in-house. If revenue growth decelerates or R&D fails to convert into premium, sticky software streams, the current valuation may be fair or optimistic.
Why I still prefer the long: the company is demonstrating sequential revenue growth (Q1 to Q2 FY2025) and converting to healthy operating cash flow ($213M in Q2 FY2025). The balance sheet has limited liabilities (~$512M) against ~ $12B of equity and assets, providing capital optionality. If Mobileye simply avoids major execution missteps, the market should re-rate it toward higher P/S multiples given its road map into software & cloud monetization.
What would change my mind
- I would turn neutral/bearish if next two quarters show: sequential revenue decline, materially lower operating cash flow, or R&D that fails to produce clear commercial milestones.
- Material adverse regulatory rulings or a major safety incident tied to Mobileye tech that forces recalls or limits deployment would also change my stance.
- If balance sheet strength deteriorates (meaningful debt or dilutive equity raises without clear use of proceeds), I would re-evaluate the risk/reward unfavorably.
Bottom line
Mobileye is a growth-oriented leader in ADAS and autonomous-driving software that is currently trading at a price suggesting pessimism about its path to sustained profitability and longer-term monetization. That pessimism is understandable but overdone relative to the data in the filings: sequential revenue growth, robust operating cash generation (Q2 FY2025: $213M) and a conservative liability profile. For disciplined investors comfortable with tech/auto execution risk, initiating a position in the $10.50-11.00 range with a $9.00 stop offers an asymmetric payoff: upside to $13.5/$17.5/$22.5 depending on the timeframe, while downside is limited by the stop and the company's strong balance sheet.
Trade with position sizing discipline and be prepared to adjust stops or trim into catalysts (OEM wins, margin beats, or evidence the Mentee Robotics deal is accretive).
Disclosure: This is a trade idea, not personalized financial advice. Do your own diligence and size positions to your risk tolerance.