Mobileye NV Headwinds Mean Caution for MBLY Investors

It is prudent to offload certain stocks that do not have enough potential and are weighed down by tough market conditions. Identifying such stocks on a regular basis and getting rid of them is one of the keys to successful investing.

Mobileye NV (MBLY) seems to be one such stock, which investors need to dump for now if they are looking to avoid long-term losses. The stock faces several headwinds at the moment and discarding it at the right time is vital to shielding one’s portfolio from massive losses.

Here’s Why Mobileye Should be Avoided

Mobileye carries a Zacks Rank #5 (Strong Sell). Going by the Zacks model, companies holding a Zacks Rank #5 are likely to underperform the broader market.

Also, analysts have become increasingly bearish on the stock over the past couple of months with estimates moving south. With seven out of nine estimates moving down and no upward revision in the past 60 days, the Zacks Consensus Estimate for fiscal 2016 earnings declined from 47 cents to 44 cents.

Further, Mobileye’s stock price history reveals that the company has disappointed for long. In fact, over the last six months, shares of Mobileye have shown a negative return of 12.3%, underperforming the Zacks Categorized Electronics-Miscellaneous Components industry, which has showcased an increase of 6.8%.

Mobileye also delivered negative earnings surprises in two out of the last four quarters with an average miss of 2.4%.

Mobileye’s unimpressive run may continue as the company is currently trading at a higher price/earnings (P/E) multiple than the industry average.

Therefore, we believe that Mobileye with its higher forward P/E valuation of 57.4x compared with the industry average of 17.3x may be a poor bet.

Adding to the woes the stock carries a VGM Score of “D.” We note a weak Style Score robs the stock of much of its upside potential over the next 30 days. So if a stock you’re in slips to Style Score of D or F, it’s better to sell that stock and switch to one with a score of A or B.

Our Take on MBLY Stock

Mobileye provides essential components for the emerging advanced driver assistance systems (ADAS) market. Rising competition from ZAGG Inc (ZAGG) and CalAmp Corp. (CAMP) remains concern.

It is worth noting that Mobileye’s earrings of 11 cents in the last reported quarter (third-quarter of 2016) missed the Zacks Consensus Estimates by a penny.

We expect the aforementioned factors to hurt the company’s near-term profitability. Hence, we recommend investors to stay away from Mobileye shares until the Zacks Rank, VGM score and estimates improve.

Stock to Consider

A better-ranked stock in the technology sector is Marvell Technology Group Ltd. (MRVL), sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Marvell has long-term expected earnings per share growth rate of 12.33%.

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks’ private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks’ private trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Marvell Technology Group Ltd. (MRVL): Free Stock Analysis Report

ZAGG Inc (ZAGG): Free Stock Analysis Report

CalAmp Corp. (CAMP): Free Stock Analysis Report

Mobileye N.V. (MBLY): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

More From InvestorPlace

Article printed from InvestorPlace Media,

©2023 InvestorPlace Media, LLC