Mobileye had a good day on Friday, rallying 4% after a Goldman upgrade to Buy from Neutral with a $50 target, suggesting shares could rally some 25%. Here’s the rationale:
We upgrade Mobileye to Buy from Neutral following a significant PEG de-rating from its post-IPO peak, which in our view primarily reflects technical factors (expiry of the IPO lock-up in January and news that Mobileye was considering a secondary offering). We continue to believe Mobileye offers exposure to a highly attractive and rapidly expanding market (Advanced Driver Assistance Systems – ADAS), with compelling drivers (automotive star ratings regimes, consumer pull), and a strong ability to capitalise as a low-cost disruptor based on a robust technological edge (see “Disruptive tech, strong positioning, autonomous roadmap; Neutral”, August 26, 2014). As such, we think the current share price provides an attractive entry point given 25% upside to our unchanged 12-month price target of US$50.
Yes, “technical factors,” like the fact that in January, the company filed to sell [4] up to $500 million worth of shares on behalf of existing holders with Goldman as the lead bookrunner. Of course whether or not Mobileye was “considering” a secondary had nothing to do with Goldman’s decision to upgrade the shares on Thursday, which is why we’re completely confident that today’s secondary announcement [5] with Goldman listed as the lead is just a coincidence, although it is worth noting that Goldman owned nearly 8% of the float going into the offering and will sell 4.63 million shares:
This is reminiscent of Morgan Stanley’s epic Tesla upgrade [7] 24 hours before taking the lead on a convertible note issue back in February of last year and serves as a rather hilarious reminder that the idea of a Chinese wall between investment banking and research is an absolute joke. The bottom line: If you bought MBLY on Friday you have officially been muppetized.

