Bearish bets against Mobileye NV are receding after the maker of chips and software for driverless cars said it would team up with BMW AG and Intel Corp to deliver fully autonomous cars by 2021.
Traders cut short interest on Mobileye, at one point the world’s most-shorted software stock, to 17 percent of shares outstanding last week, near its lowest level since September last year. It peaked at 22 percent on June 6.
Mobileye shares last week rose 3.4 percent to US$49.6, the stock’s highest since Oct. 16 last year. The stock has doubled since hitting a low of US$24.54 in February.
Investors said Mobileye’s pact with BMW shows it has gone beyond advanced driver-assistance systems to establish itself as a key partner for automakers as they step up investment in the race to achieve fully autonomous driving.
The stock’s meteoric rise after a US$1 billion initial public offering in 2014 made it a target for short sellers such as Citron Research, which argued its valuation implied a quasi-monopoly status for what was essentially an early-to-the-game chipmaker with no moat to fend off competition.
“People were worried they’d be a vision player who would get leap-frogged or commoditized,” said Joseph Fath, who helps oversee about US$65 billion at Baltimore-based T Rowe Price. “Autonomous capability driving is going to come faster than expected and this is the purest way to play it.”
Jerusalem-based Mobileye has announced partnerships with General Motors Co, Volkswagen AG and Nissan Motor Co to develop mapping technology that gathers crowd-sourced real-time data from automakers’ fleets of vehicles, something cofounder Amnon Shashua has called the “missing piece” in the march toward driverless cars.
It is also meant to help automakers fend off competition from Uber Technologies Inc and Alphabet Inc’s Google, which has run more than 2.25 million kilometers of tests on its own driverless prototypes.
Mobileye’s products are to be more deeply embedded in cars as they come closer to full autonomy, from road-mapping technology to processing sensing by cameras and radars, to the algorithms that dictate driving policy.
The BMW partnership was announced a day after a fatal accident in the US involving a Tesla sedan driving on the car’s so-called Autopilot.
Tesla uses Mobileye technology in its Autopilot, which it started to introduce in October last year as a step toward autonomous cars. The crash fueled debate over whether self-driving cars are ready for the real world.
While four-fifths of analysts covering Mobileye recommend buying the stock — including Piper Jaffray & Co which raised its price target to US$60 last week — some still warn of competition and see limited upside after the recent rebound.
JPMorgan Chase & Co initiated coverage with a neutral rating and US$55 price target last week.
Mobileye has “very strong penetration” and a “content-led growth outlook” but its valuation “seems to largely already reflect these prospects,” the analysts wrote in a note on Tuesday, adding that the stock has “potential competitive risk and eventual margin pressure that may not be fully reflected.”
At 17 percent, short interest in Mobileye is still the second-highest among 44 global software companies with market values above US$5 billion, according to data compiled by Bloomberg.
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