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Stock Strategist

We See Accelerating Growth for Mobileye

The firm’s narrow moat is evident in pricing power that generates ROICs in excess of 40%.

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We think  Mobileye (MBLY) has positioned itself as the provider of a key technology enabler for vehicle systems that will be required as standard equipment in order for automakers’ vehicles to receive coveted 4- and 5-star government crash test ratings. We expect the adoption of active safety features and advanced driver-assistance systems by global automobile makers will support average annual revenue growth for Mobileye of slightly more than 20% for the next 10 years. The firm’s asset-light business model results in wide margins and high returns on invested capital.

Given its higher scalability, Mobileye more closely resembles a software business than an auto-parts vendor. Its high revenue growth does not require an investment in bricks and mortar or tooling and equipment like a traditional capital-intensive auto-parts supplier. Mobileye designs its own microprocessors and develops proprietary algorithms, but outsources all of its manufacturing, including microprocessor fabrication.

Richard Hilgert does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.