Mobileye NV (MBLY)

[TRUISM]

Mobileye - Great Product, Great Business, Non-Compelling Investment Opportunity
The Value Investor
Aug. 6, 2014 4:21 AM ET



Summary

Mobileye has seen a hugely successful public offering despite continued tensions in the Middle-East.
The company's solutions are very appealing, as the company reports accelerating growth and is actually profitable.
Yet the current valuation relies on a lot of optimistic assumptions going forwards, limiting the risk/reward opportunity in my eyes.
Mobileye (NYSE:MBLY) designs and develops technologies for camera-based Advanced Driver Assistance Systems, also known as ¨ADAS¨. These solutions are aimed to keep passengers safe, reduce the risks of traffic accidents and enable autonomous driving.

The company's products are very cool and are adopted by the world's largest original end manufacturers. Yet despite the only accelerating growth and profitable operations, I find the current risk-reward opportunity very limited with operating assets being valued at a whopping $7.5 billion.

The Public Offering

Mobileye is a company based in Israel focusing on technologies which allow camera-based ADAS. The company has developed software and the EyeQ chips which allow for the interpretation of the visual field to identify obstacles.

The first solutions being developed by the company were included in cars back in 2007. By now some 3.3 million vehicles across the globe are fitted with the company's solutions. By the end of this year, the company aims to supply 18 OEMs for some 160 car models in total. The company stresses the dominance of the company in the field, having provided its services in 80% of the cases in which it was asked to submit a quotation.

With the solutions, the company aims to benefit from two major trends. For starters is the quest for safety which pushes the exponential growth of the ADAS solutions while the focus on autonomous driving is very helpful as well, especially going forwards.

Mobileye sold 35.6 million shares for $25 apiece, thereby raising $890 million in gross proceeds. Some 8.3 million shares are sold by the company which therefore will raise $208 million in gross proceeds while the remainder of the proceeds will benefit selling shareholders.

Shares were offered above the high end of the preliminary offering range of $21-$23 per share. At the public offering price of $25, with some 212.3 million shares outstanding, shares are valued at $5.3 billion.

Banks which aided the company in its process to become a public firm were Goldman Sachs, Morgan Stanley, Deutsche Bank, Barclays, Citigroup, Wells Fargo, Baird, William Blair and Raymond James.

Valuation
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