Mobileye Stock Plummets 25.6% After Warning of Potential Challenges in 2024
Mobileye experienced a significant drop in its stock price on Thursday, with shares plunging 25.6% as of 3:20 p.m. ET. The company, which is majority owned by Intel (NASDAQ:INTC), issued a press release this morning, warning of potential challenges in 2024.
The semiconductor sector, which Mobileye operates in, is known for its cyclical nature. This means that it follows a pattern of highs and lows, regardless of the experience of the companies involved. In the past, there have been periods of high demand and supply constraints, which have led to customers over-ordering in anticipation of potential shortages. When these constraints ease, demand decreases, and customers stop their orders, resulting in a drop in demand. This has been seen in other sectors, such as smartphones and PCs, and is now happening in the auto chip sector.
Earlier today, Mobileye announced that its fourth-quarter revenue would be lower than previously expected, with a range of $634 million to $638 million. The company’s outlook for 2024 is even more concerning. Management expects a 9% decline in revenue, with a range of $1.83 billion to $1.96 billion, and a significant drop in adjusted non-GAAP operating income. This is due to excess inventory at customers, which the company estimates to be 6-7 million units of EyeQ® SoCs. This excess inventory is a result of customers building up inventory in the Basic ADAS category due to supply chain constraints and lower-than-expected production at certain OEMs in 2023.
The company anticipates a recovery in the remaining three quarters, with flat to mid-single digit growth compared to 2023. This is a significant decrease from the 24% growth analysts had predicted for this year. This news has caused a sharp decline in the company’s stock price, reflecting the seriousness of the situation.
The drop in stock price, Mobileye still trades at over 10 times its 2023 revenue figure. This means that the stock is not cheap, even after the decline. This could be a temporary correction in a cyclical sector, within a long-term trend towards increased automation in vehicles. Additionally, the company will be presenting at the Consumer Electronics Show in Las Vegas on January 9, where more product details and potential commentary on the long-term outlook may be shared.
Mobileye’s stock has taken a hit due to the company’s warning of potential challenges in 2024. This news has caused concern among investors and has led to a significant decline in the stock price.
