Citron Sets Short-Term Target of $25 and Long Term Target Below $10
There is NOTHING in the past or present financials, business performance or realistic future technology prospects of Mobileye that would get it within miles of justifying its current $12 billion market cap.
Mobileye’s management is riding the hype cycle of the “self-driving car” story, a decades-long high-stakes technology bet which the operators of this small fabless chip manufacturer know they can never be a serious player in.
Investing in this company is a losing bet on a blue-sky future that just does not exist. This is not merely the opinion of Citron– it is the actions of management who have spoken with their dollars – loud and clear — selling stock more aggressively than Citron has ever witnessed — as documented in this report.
Citron Drops the bomb on Insider Selling
Just 11 weeks ago, Citron Research published commentary on the overdone run-up in Ambarella’s stock, pointing out how far investor enthusiasm had detached from reality. In the last six weeks, while the Nasdaq Composite shed 8.7%, Ambarella plunged 38.6%.
[drizzle]What happened? Yes, the market has experienced a sentiment-shift, but more importantly, after Ambarella reported quarterly results, Wall Street realized that “drone dreams” couldn’t support a fantasy valuation for a chip company that faces a competitive future.
Citron has seen this scenario play out many times in its 14 years of publication. Nobody on Wall Street has a longer and more consistent track record of exposing stories where enormous risk of the investment premise is being ignored in the face of massive hype.
Does anyone remember the big 3D-Printing insanity of 2013-2014? (DDD, XONE, VJET)
The play book looks like this: Wall Street finds a story that the public will feed on, the media fuels the story, and the analysts promote the story, while management gets rich selling freshly minted stock into the story.
Lather, Rinse, Repeat … Introducing Mobileye
Citron offers an unassailable thesis why Mobileye is on its way to $25 near term: Follow the Money.
What is Mobileye’s Actual Business?
Mobileye is a pioneer and a market leader in Advanced Driver Assistance Systems. For those of you unfamiliar with (ADAS) here’s a Wikipedia primer to get you up to speed:
Note that while Mobileye is a pioneer in ADAS, they did not invent nor have any broad proprietary claim over ADAS functionalities. Mobileye has been a leader in supplying ADAS technology on a chip to the auto industry and deserves credit for being an early mover in the space. And that is where the story should have ended.
There is NOTHING in the past or present financials, business performance or realistic future prospects of Mobileye that would get it within miles of justifying its current $12 billion market cap. They do not own a bar-the-competition patent portfolio on ADAS, nor do they have locked-in decades-long supply commitments. There are no barriers to entry for competitors other than legitimate R&D, and they do not have superior technology. They just got there first.
Investing in this company is a “Hail-Mary bet” on a blue-sky future that just does not exist. This is not merely the opinion of Citron– it is the actions of management who have spoken with their dollars — loud and clear — selling stock more aggressively than Citron has ever witnessed — as documented in this report.
Mobileye’s Current Valuation is Unfathomable
There is no arguing that compared to other semiconductor companies Mobileye’s valuation is absurd. Even if the most optimistic revenue scenarios possible are extended through 2017…it’s still absurd:
Even a stock price of $25 cannot be justified without requiring investors to believe that Mobileye will face zero near term competition as management and analysts “spin” in the story. Citron finds these claims to be ignorant, negligent, fraudulent, and oblivious to the facts.
Competition Is Here and Now!!
While working on the Mobileye story, Citron Research was beaten to the punch on some of the important points of the Mobileye story, when Suhail Capital published an in-depth piece on Seeking Alpha, here:
http://seekingalpha.com/article/3445726-mobileye-a-very-compelling-short-thesis
The Suhail research report documents in significant detail Mobileye’s actual competitive landscape in ADAS. For brevity, Citron summarize the ADAS strategies for the 5 largest Tier-1 auto suppliers. Contrary to what the analyst community is spewing out, Mobileye is facing years of intensifying competition.
| Top 5 Tier 1 | Comments and Links |
| ADAS Suppliers | |
| Bosch | Over 2,000 engineers working on ADAS technologies |
| Continental | Continental acquires ASL Vision
Continental acquires Elektrobit Continental OEM’s new ADAS to Toyota (camera plus LIDAR) |
| Delphi | Delphi acquires Ottomatika |
| DensoDenso | Formerly a Mobileye partner.
Now shipping its own units. Toyota still affiliated, but will offer its ADAS line to all auto manufacturers in 2016. |
| Autoliv | Own monocular camera units shipping 2015
Formerly partnered with Mobileye for ADAS. |
Ominously, their main competitors are their own customers. Four of the top five Tier-1 auto industry suppliers now ship camera systems that compete directly with Mobileye’s product. Particular concern to Mobileye should be Denso and Continental, which were formerly Mobileye customers — they’ve now gone on to compete against Mobileye with their own units, most using competing technology approaches.
Note: These are not just any competitors. Mobileye’s sales channel is utterly dependent upon Tier-1 suppliers. They are Mobileye’s gateway to selling to nearly all auto makers.
We’re not intending to repeat all the details documented by Suhail, Citron encourages serious investors to read it for yourself. But it is obvious that there is not just a single ADAS solution — there are a half dozen or more viable technologies, including monocular camera / image analysis, stereo cameras (significantly different from a technology perspective), radar, LIDAR (lasers) and hybrid blends of multiple sensors, all of which are supporting competitive ADAS product suites.
See full report below.
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