Mobileye NV (MBLY):Announcement of autonomous driving program with BMW &Intel

News

    Mobileye, Intel and BMW, at a press conference attended by theirrespective CEOs, have announced a joint collaboration to deliver fullyautonomous driving by 2021.

    Analysis

    Key takeaways: (1) The collaboration will see Mobileye play a key role asthe software vendor, among other things, and in our view this validates itsstrong position in the ecosystem for autonomous driving, as OEMs seekpartners to fend off emerging threats from tech vendors. (2) The partnerstarget to go significantly beyond basic autopilot functionality i.e. the"hands off" scenario, and progress to "eyes off" (level 3), "mind off" (level4) and ultimately "driver off" (level 5) functionality by 2021. The latter willinitially be within geofenced areas, which will be especially relevant forride sharing. The ambitious timeline resonates with our view that growth inthe autonomous driving market is accelerating. (3) Aside from providing itssensing software, deployed in conjunction with its EyeQ5 chip, key buildingblocks provided by Mobileye include not only driving policy software(algorithms to ensure the car can learn to drive like a human, rather thansimply follow a rule-based approach) but also localization i.e. the REMmapping solution. (4) The three partners will strive to achieve an industrystandard and define an open platform for autonomous driving which willaddress level 3 to level 5 automated driving and will be made available tomultiple car vendors. We see standardization as key in ensuring regulatorysupport. (5) Near term, the companies will demonstrate an autonomoustest drive with a highly automated driving prototype. In 2017, the platformwill extend to fleets with extended autonomous test drives.

    Implications

    We remain Neutral rated on Mobileye with a 12m PT of $40 based on aDCF plus an M&A component at 13x 2020E EV/sales (30% weighting). Keydownside risks: Platform launch delays, Tier 1 competition. Key upsiderisks include: faster ADAS market penetration and REM traction.