Tuesday, November 11, 2014

Research report MBLY

The big concern I have with MBLY is the awareness that it has been a hot issue for a number of months, lots of new money attracted to it, all the chart monkeys and trend followers.  So I enter this research stage with some reticence.  I wonder if the attraction to this new issue has been ignorant hope.

Clearly the product is a game changer for the driving world.  Tesla is using them as are every other major company.  They win 80% of the jobs they bid on, appear to have first mover advantage.  The founders are still with the company and own a good bit of stock.  They have great growth prospects especially if they can work out the algorithms for future driver less technology.  They stand to make money off of every car built each year with products in limited models at present.

Real world example:  I tested a Honda Accord Hybrid with all the bells and whistles.  Lane departure warnings were nice on major roads.  Front camera/radar device did not work, it dropped off the car.  I viewed that malfunction as a Honda assembly or salesman issue.  Tesla video showing new features also very interesting.  The safety features in modern cars are exactly what will save distracted drivers such as myself.

I think BASM checks out.

My concerns:  The S-1 mentions immediate dilution of >$23 from the $25 IPO price.  GS major owner with conflict of interest.  IPO purpose number one is "liquidity for existing shareholders".  I get a sense they were doing just fine turning the corner of profitability and wanted to provide a cash out point for early investors.  They did not access the capital markets to grow the business.

The business is growing.  This is likely a good company to invest and own for the future.  I will wait for post IPO phase excitement to settle down and then work on some growth projections if I can wrap my mind around them.

No comments:

Post a Comment