RBC Capital Markets Lead Equity Analyst on Global Autos Tom Narayan breaks down several stocks he has "Outperform" coverage on, including Ferrari (RACE) and autonomous driving developer Mobileye (MBLY).
Narayan calls Ferrari "a growth stock into 2030," while outlining Mobileye's tailwinds onset by its various partnerships with major automakers.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
JULIE HYMAN: l want to talk about Ferrari in particular, because that one kind of stands out to me. What's the bull case on Ferrari for this year?
TOM NARAYAN: Yeah, so for this year specifically, I don't think there's like a huge catalyst really. This is more of a steady as she goes, it's a luxury stock, not an auto stock. It's a growth stock into 2030 really. But I do think this is one where consensus expectations are always conservative this company always beats and raises.
And look, if you want to own a stock that could pull back, I actually think they could give some conservative guidance for 2024 when the report results in February. That could create a great entry point. Everyone that I talk to, wants to own this stock, but they feel that it's too expensive. So you could have a nice little entry point if they give a conservative guide for '24 and then I'm sure everyone will pile in and support the stock.
But ultimately, it's a luxury stock. There's not many other companies like this. It's a growth stock. I have them growing at 17% EBITDA growth per year from now to 2030. I don't know any other auto stock where you could say something like that.
- And Tom, another name you like, Mobileye. Your target there is 53. How come? What's the argument for Mobileye?
TOM NARAYAN: Really interesting story, Mobileye. They have a bunch of announcements coming. These guys do the level 2 plus for autonomy for cars. This is not like robotaxis yet, but it's for things like what Tesla has with their FSD product. Mobileye is a supplier, and it's already won a bunch of wins recently, Volkswagen notably.
They have Polestar Volvo, a lot of Chinese OEMs and you have this ability-- right now they sell a $50 product for basic ADAS, and they're about to sell this product, which is more like $1,300, $1,400 per car, and the margins are just going to explode. So it's just a specific special situation with a bunch of announcements coming in the next coming weeks and months that I think could be one of the big stories of 2024, which is level 2 plus autonomy as car companies try to keep their pricing high.
One way they can do it is to add software and make people like us keep paying more and more for them. And I can tell you having the car drive itself a lot, maybe not 100%, but let's say 80%, is a huge benefit, a huge asset. A lot of people will love these types of products.
