Mobileye Was Intel’s Star Segment in 2022, but Is Mobileye Stock a Buy?

Share prices of Mobileye Global (MBLY 1.33%) are on a tear since they made their debut (again) late in 2022. Parent company Intel (INTC 0.43%) spun off some of its stake in the autonomous vehicle chip designer into a publicly traded company to raise much-needed cash last year, but it said it still owns 94% of the company.

Intel’s own tires have been blown out, and there’s no immediate relief in sight. Mobileye, meanwhile, was a standout performer for Intel in 2022. With some shares freed from Intel and available for purchase, is Mobileye a worthy investment for 2023 and beyond?

Navigating a treacherous road with an imperfect copilot

Before addressing Mobileye’s business directly, we need some chip industry backstory. The semiconductor industry is presently dealing with a slump in sales emanating from a severe dropoff in consumer electronic sales (particularly PCs and laptops). While the market for data center and other enterprise chips is still strong, Intel is in especially sore straits as it has fallen far behind its competitors. It’s forecasting a 40% year-over-year decline in revenue to kick off 2023, and it will operate at a steep loss even though that 40% decline should still equate to about $11 billion in quarterly sales.  

The majority of Intel’s business is seeing yellow flag warnings, but Mobileye is seeing nothing but green. Revenue in 2022 was up 35% to $1.87 billion — including a 59% year-over-year increase in the fourth quarter to $565 million.  

Automotive chips are still zipping along at a fast clip. The chip shortage brought on by the pandemic is finally easing for most markets, but automotive semiconductor manufacturers are reporting they are still fully booked through the rest of 2023 and into 2024. Consumer spending is beginning to wane and could impact auto

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The 3 Best Car Stocks to Buy for Potential Profits in 2023

Over the past year, the automotive industry has faced challenges such as shortages of chips, high inflation, and rising interest rates. Total new vehicle sales in the United States declined 8% year-over-year in 2022, registering its worst performance in over a decade.

However, the sale of electric vehicles (EVs) rose 65% year-over-year, increasing almost two-thirds compared to 2021. In 2022, EVs accounted for 5.8% of all new car sales in the United States, up from 3.1% in 2021. With more manufacturers launching EVs, the automotive industry is expected to witness strong demand in the long term.

Additionally, car manufacturers are expected to benefit from the CHIPS and Science Act as it is anticipated to enhance their production capabilities by reducing their dependence on foreign chip suppliers.

According to S&P Global Mobility, U.S. new vehicle sales in 2023 are expected to be 14.80 million, while Cox Automotive forecasts sales of 14.10 million units, coming in higher than the 13.90 million units sold last year.

Toyota Motor North America’s executive VP Jack Hollis said, “We’re cautiously optimistic about the future. In 2023, there will be an uptick not quite as high as we would love it to be but going in the right direction.”

Therefore, it could be wise for investors to buy fundamentally strong car stocks General Motors Company (GM), Honda Motor Co., Ltd. (HMC), and Subaru Corporation (FUJHY).

General Motors Company (GM)

GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.

In terms of forward non-GAAP P/E, GM’s 5.10x is 65.1% lower than the 14.59x industry average. Likewise, its 10.46x forward EV/EBIT is 22.4% lower than the 13.49x industry average.

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