Pro Analysis

Mobileye plunge on Tesla deal loss may be overdone

People test drive the new all-wheel-drive version of the Tesla Model S car in Hawthorne, California October 9, 2014.
Lucy Nicholson | Reuters
People test drive the new all-wheel-drive version of the Tesla Model S car in Hawthorne, California October 9, 2014.

Tesla's velocity just caused a supplier spinout. Mobileye shares plummeted by nearly a fifth at one point on Tuesday after it said it would stop providing advanced cameras to Elon Musk's electric-car maker in 2018. It's a huge overreaction because of all the Tesla hype.

Sales to Tesla, after all, account for only about $2 million – or half a percentage point – of Mobileye's expected annual revenue this year, according to Evercore ISI. Even at the ridiculously high 82 times 2016's expected earnings at which Mobileye trades, that's only worth $62 million, applying the company's probable 38 percent net margin.