Beat of the Week: Mobileye Plunges as Weak Outlook Offsets Earnings Surprise

Mobileye (MBLY) shares fell steeply this week after the autonomous vehicle equipment maker cut its full-year guidance despite reporting higher-than-expected revenue and per-share earnings, citing weakness in China’s electric vehicle (EV) market.

The company reported an unadjusted net loss of $79 million, or 10 cents a share, on revenue of $458 million in the first quarter. Both exceeded analysts' forecasts. On an adjusted, or non-GAAP basis, the company generated a profit of $115 million, or 14 cents a share.

Mobileye lowered the midpoint for its revenue guidance by 6.5%, with operating losses now expected to be 34% higher. The company now expects a loss between $166 million and $195 million this year on revenue of $2.06 billion to $2.11 billion.

Waning demand in the world’s largest auto market prompted the company, which manufactures cameras, chips, sensors, and software for autonomous and electric vehicles, to slash its full-year guidance. The demand outlook in China has darkened recently, after Tesla's (TSLA) aggressive cost reductions for its EVs sparked a price war among domestic startups. At the same time, the Chinese government has pulled back incentives for prospective EV buyers.

"The China electric vehicle market has been negatively impacted by meaningful pricing actions by a global EV OEM, reduction of government electric vehicle subsidies, and general economic weakness in the country," the company said in its earnings statement.

Mobileye was a subsidiary of Intel (INTC) until last October, when it went public on the Nasdaq in a $861 million initial public offering (IPO). Intel, which bought the company in late 2017, is still the majority shareholder.

Mobileye shares closed 16% lower on Thursday after plunging up to 31% at the start of trading. Shares recovered a little in trade Friday, closing up about 1.9%. Despite this week’s losses, shares of the company are up about 7.4% year-to-date, underperforming an about 22% gain in the broader S&P 500 information technology sector over this period.