Mobileye declines as full-year revenue forecast falls

(Bloomberg) — Shares of Mobileye Global Inc. fell. by as much as 29% after the Israeli self-driving technology company provided a full-year revenue forecast that came in well below Wall Street expectations.

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Israel's most valuable publicly traded company, which makes semiconductors for driver-assistance systems in vehicles, said in a preliminary earnings report Thursday that it expects full-year revenue in 2024 to range between $1.83 billion to $1.96 billion, well below the average. Analyst estimates of $2.58 billion.

The Jerusalem-based company, which counts Porsche and Volkswagen AG among its customers, blamed the lower expectations on customers who cut back on orders after stockpiling during the pandemic. It expects first-quarter revenue to also decline about 50% from a year earlier.

“We have become aware of excess inventory held by our customers,” Mobileye said in its statement on Thursday. “As supply chain concerns ease, we expect our customers to use the vast majority of this excess inventory in the first quarter of the year.”

The sell-off had ripple effects across the chip industry. Shares of peer companies, including NXP Semiconductor NV, STMicroelectronics NV and Texas Instruments Inc., fell during trading Thursday. Intel, which spun off the company in October 2022 but still holds about 88% of the shares, saw its shares fall as much as 3.9%.

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Demand for automotive chips has held up stronger than other parts of the electronics industry, thanks to the addition of more electronic functions into each vehicle. That may not be enough to support high levels of chip shipments, with overall auto demand slowing and rising sales of electric vehicles – which require more chips – showing signs of slowing.

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Mobileye's results drew downgrades from Wall Street analysts. Rod Lash of Wolfe Research cut his recommendation of peer performance rather than outperformance. Brian Gesuale of Raymond James lowered his rating to strong buy and cut his price target to $48 from $50, saying revenue may take longer to materialize than Wall Street expects.

Read more: Mobileye drops 28% after Rev forecast misses estimates

“The potential for negative estimate revisions could deprive shares of a natural catalyst to sustainably boost stocks in the near term despite growing expectations that the company is preparing to report additional gains to clients,” he wrote in a note.

Mobileye shares are up 24% in 2023, closing Wednesday at $39.72. Of the analysts covering the company, 23 have a rating equivalent to buy, four say hold and one recommends sell. The average 12-month price target is $47.32.

– With assistance from Ian King and Mark Tannenbaum.

(Updates with additional details from second paragraph)

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