Mobileye's stock melts down as inventory issues prompt grim revenue warning

By Emily Bary

Customers are dealing with excess inventory

Shares of Mobileye Global Inc. were tanking on Thursday after the company, which makes self-driving technology, issued a revenue warning as its customers deal with excess inventory.

Mobileye (MBLY) said it expects first-quarter revenue to fall about 50% from the $458 million that it reported in the year-earlier period. Analysts tracked by FactSet had expected revenue to rise to $557 million for the period.

The company disclosed in a press release that it has "become aware of excess inventory at our customers" representing an estimated 6 million to 7 million units of the company's EyeQ product. "As supply chain concerns have eased, we expect that our customers will use the vast majority of this excess inventory in the first quarter of the year," Mobileye said.

Shares were down about 25% in midday trading Thursday. Shares of Intel Corp. (INTC) were off as much as 3.8% earlier in the session but had pared losses and were recently down just 0.6%.

Intel spun out Mobileye through a 2022 initial public offering but the chip giant still held about 88% of the outstanding equity interest in Mobileye as of the end of September 2023.

"The basic idea is that tier-1 automotive suppliers have been hoarding components related to advanced driver assistance systems (ADAS), after having struggled to obtain these items during the pandemic," Piper Sandler analyst Alexander Potter wrote in a note to clients. "Now that they no longer need these components, the tier-1 suppliers are cutting orders."

The volume shortfall could affect profits as well, the company warned. "Similar to revenue, we expect [first-quarter] profit levels to be significantly below the subsequent quarters," Mobileye said, projecting a first-quarter operating loss of $242 million to $257 million.

Mobileye noted that the issue of excess customer inventories could impact revenues "to a much lesser extent" in the rest of 2024. "As a result, we expect revenue for [the second through the fourth quarter of] 2024 on a combined basis to be roughly flat to up mid single-digits as compared to the same period in 2023, and we expect inventory at our customers to be at normal levels by the end of 2024," the company said.

Its full-year outlook calls for $1.83 billion to $1.96 billion in revenue, whereas analysts were modeling $2.56 billion.

"With the damage done (unfortunately) we maintain our [long-term positive thesis], but fully expect shares to be in the penalty box for a couple of [quarters]," Wells Fargo analyst Aaron Rakers wrote.

-Emily Bary

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01-04-24 1223ET

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