Last week’s report of the first fatal accident involving Tesla Motors’s Autopilot feature could have posed a major problem. Mobileye’s chips and software help power Tesla’s automated driving features. The company’s technology hasn’t been implicated as being at fault, but the accident is serving as a stark reminder of the limitations of self-driving systems and the dangers posed when those systems lull drivers into taking their attention off the road.
That may dent the image of automated cars for now. Technology and auto companies are pressing on, though. A day after the accident was reported, Mobileye announced a partnership with BMW and Intel that aims to put a fully self-driving car on the road by 2021. Mobileye’s stock is up more than 6% since the news.
To be sure, launching a fully automated car in five years’ time seems a stretch when one of the most advanced vehicles on the road now can’t detect an 18-wheeler blocking the highway.
Fortunately for Mobileye, it has significant prospects in less speculative areas. The company makes most of its money now from advanced driver assistance systems, or ADAS, that provide features such as automatic parking and adaptive cruise control. That business alone is expected to grow briskly. Mobileye projects revenue will grow more than 40% annually—hitting $1.1 billion by 2019—mostly on contracts it already has in place for ADAS features.
Mobileye trades around 60 times forward earnings, with about 19% of its float sold short. But it is also much cheaper than Tesla as a play on the future of cars, and that future looks headed in the right direction.