Want to invest in self-driving cars? Buy this stock
While many in the auto industry don't see self-driving cars hitting the road until 2030, one analyst says you can make money on the growing trend now by buying Mobileye stock.
On Wednesday, Morgan Stanley lead auto analyst Ravi Shanker upped his price target to $68 from $65 and maintained his overweight rating on the stock saying now is the time to own it. He expects automakers to make advanced driver assistance systems (ADAS) a standard in major markets in the near-future and says that could be a major catalyst for Mobileye.
"Toyota has already said that pretty much every car that they sell in the U.S. is going to have ADAS by 2017, 70 percent of cars they sell in Europe by 2015. Volkswagen said something similar a few years out," Shanker says.
"Nissan is already making an automatic braking standard in Japan by the fall of this year. If you assume roughly 100 million cars sold by the end of this decade, we say 40 percent will have ADAS options by 2020 and that goes up to 70 percent by 2029" he added.
Shanker wasn't the only analyst making a bullish call on Mobileye this week. Deutsche Bank analyst Rod Lache raised his price target to $55 from $53 and maintained a buy rating, citing growth of active safety technologies that is likely to exceed prior assumptions. The stock is up 9 percent since both calls.
Fast Money trader Guy Adami agreed with Shanker's optimistic call. "They originally were going to price a $14 million share secondary, got raised to $17 million shares. They priced at 41 and three quarters a couple of weeks ago, the stock has never looked back. Why is that interesting, because it's a tell…you own Mobileye against basically 41 and three quarters" said Adami.
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However, some traders didn't buy the story. Steve Grasso, who previously owned Mobileye stock, says the company is at a disadvantage because it primarily uses camera-based technology to detect collisions whereas competitors use cameras and radars. Additionally, there are a number of competitors jumping into the space including tech companies like Google that are working on driverless car technology.
"If you start to see these little companies start to build, it's radar that they have to start building on, not just camera base so I think that's more accurate and I think with driverless cars you're going to see that type of technology overtake Mobileye" said Grasso.