Mobileye Shares Crash After Warning Of Automotive Customers' Chip Glut

Mobileye shares tanked by up to 27 percent yesterday in pre-market trading after the self-driving tech biz surprised Wall Street by warning that customers are chewing over excess inventory and cutting orders.

The NASDAQ-listed firm, which is still majority owned by Intel, disappointed investors with the release of preliminary results for calendar 2023, which contained significantly lower-than-expected forecasts for the current calendar year.

As per the "standard planning process," including discussions with its largest clients, Mobileye said it had "become aware of excess inventory at our customers, which we believe to be 6-7 million units of EyeQ SoCs."

"We understand that much of this excess inventory reflects decisions by Tier 1 customers to build inventory in the Basic ADAS category due to supply chain constraints in 2021 and 2022 and a desire to avoid part shortages, as well as lower-than-expected production at certain OEMs during 2023," the company added.

"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. As a result, we expect that first quarter 2024 revenue will be significantly below first quarter 2023 revenues and that we will see revenue normalized during the remainder of 2024."

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"We currently expect Q1 revenue to be down approximately 50 percent, as compared to the $458 million revenue generated in the first quarter of 2023. We also currently believe that revenue over the balance of the year will be impacted by inventory drawdowns to a much lesser extent."

Mobileye didn't name specific customers but has counted Porsche, Volkswagon, BMW, and Nissan among its client base.

The revenue projection for 2024 is $1.83 billion to $1.96 billion – way below analyst consensus estimates of $2.58 billion. This is based on expected EyeQ shipments of 31-33 million versus 37 million units in the prior year, and SuperVision shipments between 175,000 and 195,000 compared to around 100,000 in 2023.

"We anticipate that the lower-than-expected volumes in the EyeQ SoC business will have a temporary impact on our profitability," the company added.

Operating losses are forecast to be between $378 million and $468 million compared to between $33 million and $39 million for 2023, according to preliminary estimates. That's quite some movement in the wrong direction.

Mobileye is crossing its fingers in the expectation that customer inventory levels will have normalized by the end of this year. There is no guarantee of this but the consensus is that the wider chip market will grow in 2024. ®